Prosper Australia

photo credit: jcarter

The Commonwealth of Australia was built on the sound principle natural resources are part of every Australian’s endowment.

The Henry Tax Review recommended and the Rudd government has accepted a new tax system for mining that builds on this idea. 

The Super Profits Resource Tax (SPRT) provides the community a share in the benefits – the economic rents – the sale of minerals brings.

Miners are unlike any other industry. They rely upon nature’s bounty. They discover but do not create mineral deposits.  The government grants the prospector a monopoly license to explore for and extract the ores, to take them away forever.

The SPRT reduces mining risk. The government shares in the cost of exploration and prospecting – significantly altering the commercial exposure. In time, the market will value government as a silent partner underwriting 40 per cent of the risk, giving Australian miners a huge advantage in exploration write-offs and infrastructure contributions. The $500 million rebate for exploration extends to new geothermal energy sources too.

Listed mining companies are wringing their hands about the costs of the SPRT while simultaneously offering a much more benign assessment to the stock exchange. If this change is so damaging, we should be observing the price of BHP and Rio Tinto shares falling hard, particularly in this time of sharemarket volatility.  They are not. This speaks volumes about the alleged ‘hardships’ the SPRT is imposing.

The 40 per cent tax on profits after deducting the bond rate falls on the excavating and processing of mineral ores. That is, low-grade mining is not discouraged as only the final profits are taxed. And taxing this way reduces the incentive to strip high grade ore from mines and abandoning the rest.

The debate about which point the super profits should be taxed from must be dealt with quickly. The five per cent above the government bond rate used by the Petroleum Resource Rent Tax is too generous, considering the exploration concessions announced. Perhaps two per cent above should be considered.

The SPRT is designed to not distort exploration and investment decisions.  Australia’s pre-eminent mining industry can and will flourish under SPRT while providing the country with a return for hosting mining activity.

photo credit: anarchosyn

The Henry Tax Review’s highlighting of Land Tax as a policy direction is a welcome and encouraging development, says Prosper Australia.

“This is THE tool to liberate the people of Australia from their current financial difficulties,” Prosper Australia’s Karl Fitzgerald said today.  “Consider the enormous economic benefits this reform offers.

“Taxing land will provide real incentives to spur land use to the best and highest use.  It will prompt a boom in investment and vastly improved access to land for all – creating a tidal wave of economic and social progress.

“The Great Australian Dream of home ownership – now impossible for a whole generation of Australians – would quickly become reality.

“I cannot overstate the potential benefits of re-basing tax onto land holding. Yes, this means introducing a tax, but it also means many others can and would be eliminated.

A land tax would allow sweeping cuts to income taxes, the end of the much hated GST and the elimination of up to 123 other regressive, unfair and exemption-riddled tax mechanisms.

It must be noted that Prosper Australia’s energetic support for a federal land tax is not a proposal to increase the government’s tax revenues as a proportion of GDP or its powers or to advance the interests of any group over another.

“This is a technical economic issue, not a morality play.

“We value that Australia is a low tax country and want it to stay that way.  Land tax aims squarely at further improving our quality of life through discouraging the hoarding of land by attaching a holding cost to it.

“More land would become available at a much lower cost.  Allied with higher incomes from lower taxes elswhere, this shifting of the tax burden would galvanize activity and opportunity.

Fitzgerald called on all Australians to embrace land tax in the interests of an equitable and just society.

“Land Tax is beautiful.  It is impossible to avoid, is transparent to all and cheap to collect,” Fitzgerald concluded.  “The Henry Review proposal needs our careful consideration.”

Media Comment:  Karl Fitzgerald  (03) 9670 2754

Gavin Putland

The ACT’s Land Rent Act, with promised savings of 79% compared to the standard mortgage-based system of home ownership, took effect on July 1. This is an innovative housing affordability policy. Here’s what I wrote about it a week before it became law.

I make the following assumptions (which do not seem to be spelt out in the Bill):

• that the capping of increases in rent will be apportioned to some measure of the general level of wages;

• that a land rent lease will be granted without any up-front payment other than the first rent instalment;

• that if a land rent lease is transferred, the transfer price (if any) will be included in the single price of the “house” or “home”;

• that the proposed extension of the scheme to lessees on higher incomes will be accomplished by repealing or amending paragraph 5(2) of the Bill.

From my reading of the Bill, I understand as follows:
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A grasp of economic rent is vital to understanding geoism and the path to social justice and environmental sanity.

Short definitions are helpful but limited – the return to privilege; a free ride at society’s expense; unearned increment; excess profits that monopolists reap in the absence of competition; income derived from assets that cannot be freely produced by private economic agents; income (real or imputed) that cannot be justified as an incentive for private economic agents; or even the natural source of revenue for the community.

Sydney’s David Smiley continues his series wherein he fleshes out the meaning of rent through a string of vivid historical examples.

David Smiley

writes:
Most history books attempt to explain progress, poverty and conflict in terms of charismatic actors and political events, seldom in terms of fundamental causes. It is therefore refreshing to find, in A Traveller’s History of Italy (Lintner, V. 1989, Gloucestershire, Windrush Press), explanations in terms of land ownership.
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Robert J McAlpine, President Prosper Australia

The time for thinkers on economic matters has come! By neglecting the field of property valuation, mainstream economists have missed some of the most important factors in market price determination

There exists an almost complete chasm of two closely related economic considerations. One dealing with the abstract, which can vary between money market commentators – the other is concerned with the measurement of the market and its value in the marketplace. Each has developed contemporaneously but along separate and independent lines. Their origins were different, one – philosophical speculation, two – judicial and administrative necessity – land valuation backed by the land valuation courts.
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This article was presented at a late 1980′s meeting prior to ACT self government and published in the Canberra Times.

Terry Dwyer

ACT finances will come from three sources – taxes, grants and borrowings. I do not propose to say much about borrowings because borrowings are not a source of current revenue. Australian Governments are generally coming to the realization that borrowing for current deficits is a dead-end road . The end comes when you have to flog whatever you can to pay your accumulated debts and you still can’t pay the housekeeping bills. Borrowing, other than for capital works which will repay principal and interest, is a shifty expedient in Government finance which is best avoided.

Turning to grants, much is clearly outside the ACT’s control. We do however need to point out firmly and clearly to the Grants Commission that there are features of the ACT which do reduce its taxable capacity in comparison to the States. Apart from the obvious National Capital functions and the ACT’s increasing service role for the South-East of NSW, there are other disabilities such as the high portion of exempt governmental or diplomatic activity here. Again the ACT suffers more than the States from the Federal monopoly of income tax because of the high proportion of higher income and two income households in Canberra. Many of Canberra’s fiscal disadvantages are well set out in the ACT submission to the Grants Commission.
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