RSPT… the reality of the proposal…

I really thought the below from the Managing Director of Xstrata, Mick Davis, who wrote in a letter to London’s Financial Times this morning ( it’s worth quoting at some length):

“Australia’s reputation as a stable regime for foreign investment has already been damaged and investments in Australian resources are at risk of being delayed or canceled. The consequences will be borne by mining communities, prospective employees, superannuation funds, customers, service providers and suppliers, impacting on Australia’s prosperity, particularly in resource-rich remote or rural locations.

“Resources are immovable but diversified mining companies have a choice of countries in which to invest. The government has shown itself willing to breach investors’ trust and damage the economic case on which multi-billion dollar investments were made. In developing countries, we manage this risk by availing ourselves of fiscal stability agreements. Sovereign risk concerns about Australia may once have seemed absurd. Sadly, today they are foremost on every mining company board’s agenda.

“The mooted risk of other countries following suit is largely overdone. No other country is considering imposing such a punitive tax on its mining industry. Australia’s resource taxation will be isolated as the highest in the world at 57 per cent. Indeed, many resource-rich nations regard this tax as an opportunity to gain a larger share of global mining investment – unfortunately for Australia, it is”

This is real, and the above especially the part about the consequence in bold… is how it will impact on us.  – what they don’t mention is of course what it will do the Australia’s reputation and our foreign exchange rate… including our balance of payments, and lets not forget our GDP…

Please – could someone turn the lights on in Canberra, especially in the heads of the idiots who thought this up…run the figures through the modeling again… I could even do this in a spreadsheet (I don’t need a super computer)… its so simple – the government needs to see that they are impacting the whole countries future here… Rudd and Swan ….. what a legacy to leave… Australia as a real banana republic thanks to the political meddling based on totally unrealistic and incorrect assumptions that they have feed into their modelling.

If the Government goes ahead, assuming they can get it through the senate… the miners will say no thanks and they will say it unanimously.  They will change their plans, their focus, and move to another country that welcomes them (surely with the appropriate incentives), and has not taken them for granted and so penalizes them – and they will take their money and go with our benefits, our future and our financial security with them…lets not forget that they will not be paying tax here.

What they, that is Swan and Rudd need to understand is that these are by and large Public companies, real Multi-Nationals who have only one thing to consider besides the Corporate Laws and that is their fiduciary duty to the company and to the shareholders, that is to create shareholder value… paying 57% effect tax does not do that… I really like the comment though that really encapsulates it… The government has shown itself willing to breach investors’ trust and damage the economic case on which multi-billion dollar investments were made ….. if the tax comes in we can say goodbye to the insulated artificial lifestyle we enjoy as a country… and hello at the very least to high unemployment, falling real estate prices especially in the West and in rural / mining economies and a lot of mining associated companies without customers.

Such an event is a no-brainer… a lose-lose for Australia and it is so inevitable – if Australia wants a future with a resources sector as part of the mix, the tax cannot be introduced … if in their ignorance they do, then it will have to go at the first opportunity, probably after the next election.

This is real, and it is a commercial reality…if they companies do leave and seek other pastures, you can be sure the deal to have the companies come back will be a lesson in brinkmanship…something that has not seen since the hard ball days of the “cold war”…with the Australian government saying… ..”how high did you want me to jump, Sir..”  – the only trouble with that is it won’t be Swan and Rudd saying it… because they will be in opposition..

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