Australia is planning on bringing in a ‘super profits’ tax on mines, which I’m guessing could result in the United States and Canada exporting more coal to Asia.
Financial Post article-
http://www.financialpost.com/news-sectors/story.html?id=2982595
Globe & Mail article-
http://www.theglobeandmail.com/report-on-business/australian-mining-tax-riles-sector/article1555467/
[11:20 AM Weds., 05 May 2010 - fixed formatting, added WSJ link, etc. - PDN.]
An article in yesterday’s Wall Street Journal said that the rate would be 40% of the profits.
Another article in the WSJ yesterday detailed how China has become a net importer of coal in the past few years, esp. of the high-quality metallurgical coal that’s used for making steel, which it doesn’t seem to have much of. China is also importing some steam/ thermal coal for power plants, esp. those along the coast where it’s cheaper to bring it in by ship than by rail from the mines in the far-away deep interior. The result has been a strengthening and increase in world-wide coal prices. Finally, there was also mention of shipping some of the cleaner Powder River Basin coal there to mitigate air pollution effects ! See China Ignites Global Coal Market by Shai Oster, in the ‘‘Business’’ section on May 4, 2010, esp. the ‘bar-chart’ graphic that compares China’s coal imports and exports - ‘on-line’ at -
Note: You may have to do a Google ''Advan
We’ll get more exports until the politicians in this country hear about Australlia’s tax. Then, since it’s being done in another country it must be the work of a genius, so they’ll want the tax here too.
I think Butch is right, having a “Golden Goose” can be a good thing, if somewhat problematic.
If you invite a politician to a pot luck dinner; you might as well expect that they’ll butcher the goose, because they have it and in their mind they can eat for free…[2c][banghead]
Texas, Alaska and some other states already have such a tax on oil wells, only they call them royalty payments.
Well if they don’t spend it, but rather apply it to the debt, that would be good. I would rather they use the coal in this country. There is a lot of coal in this country, but a lot of it isn’t economical to mine. Hence Railroad Man’s 30-year lifespan for the PRB. Keep the cheap coal in this country, its going to take at least 30 years to find an energy source to replace it.
In Minnesota the tax on Iron Ore mined is called a Severance Tax.
Except that most of the Export coal is coking (metallurgical) coal and “saving” it to burn in powerplants would be uneconomical and wasteful…
Years ago, when I lived in Wyoming, the real estate taxes were reletively low, because the state got a lot of money from the mineral severance taxes on coal, oil and gas.
Yes there are taxes (severance or whatever in various States) but those who elect to extricate the minerals know that going in and so it is factored into their business plan. It appears that Austailia is proposing to tax the “profits” which does not permit the current companies to have it factored into their business plan.
What politicians, and interest groups who support them, fail to understand is that a business can elect to QUIT, hence no profits, no jobs and no purchasing of materials to keep the business operating. John Galt’s successors are out there and have that card to play if pushed to far.
Wait a minute.
I do not entirely trust any media but both articles say this is an excess profits tax not any severance tax. The problem is with what Australia is shipping the extracted costs are so cheap because of the size of the deposits that the mining companys are making a great profit by just slightly undercutting prices/costs of other sources of the minerals. Now how do you define excess profits?. Corporations are good at hiding profits when they want to hide them.
Of course since the tax is supposedly an “excess profits” tax, the tax will amount to quite a bit less than 40 % of the selling price of the coal. While the US might see some benefit from this, we have minimal port capacity on the West Coast for bulk minerals and are unlike to build any. The loss of the mine at Montcoal, WV in the tragedy last month means the US right now is tight on Met coal for use by US Steelmakers. The Canadians are somewhat better positioned to benefit than we are.
Excess profits. Is that at all like having ‘too much fun’? Or, maybe ‘too much success’? Sounds to me like a scheme to dampen the level of accomplishment of a clever business plan. A regression to the mean by any other name…
Beaulieu,
You assert that corporations are good at hiding profits. Will you please cite examples which led you to that assertion’ If you have none then please furnish us with what expertise you possess that: ENABLES YOU NOT ONLY TO REACH THAT CONCLUSION; BUT ALSO TO COMMUNICATE IT TO YOUR FELLOW POSTERS WITH THE EXPECTATION THAT WE WILL ACCEPT IT.
Hey don’t blame Beaulieu!
I made the statement and here is a prime example. Take 2 sub companys and transfer accelerated depreciation assets from one company to the other. Asset still has 90% useful life but 2nd company only shows asset cost of 10%.
Can’t happen? It did. One example is of Eastern Airlines completely overhauling a JT-8 engine to Zero time Specifications.At 3200 hrs the C2 compressor disk is due for a change. Engine removed disk changed and then the engine is then transferred to Continental Airlines and the engine except for scheduled disk changes will go to 12 - 18K hrs. Continental then transferrs an equal engine that has almost no time left which Eastern then has to overhaul. A few engines went directly to overhaul when boroscoped. Add in all the other fixed assets that suffered the same fates and you get the idea.
EAL’s reservation system was transferred to Texas Air Holdings ( EAL & CO holding company) at almost fully depreciated basis then turned around and charged EAL highest booking fee per passenger in the industry.
Worse case was a Texas Air Holdings (?) formed fuel supply company was formed and charged EAL about 10 cents per gallon pumping fee. Even today that is considered a very very high charge. EAL was paying nothing as they had direct fuel contracts.
Hides profits?? Yes and make other company look good. EAL out of business and then 3 - 4 years CO into bankruptcy but came out.
bluestreak,
The implication was that something was happening outside the rules (both IRS and general accecpted accountimg guidelines) that is illegal or unethical and nothing you have shown appears to break those rules. Further you show no documentation, either lawsuits or IRS audits which suggest the items you cite are a violation of any sort.
What you have cited is just your opinion, and your expertise was not stated. You may may be an expert and have support for all you say but thus far it is not in evidence.
[Edited at 11:50 AM Thurs. 06 May 2010 to fix formatting and add link to book at the Cliff Robertson reference. - PDN]
I suppose the claim of “hiding of profits” is a populist belief or an article of faith among some people, but it does have a basis in reality, particularly when it is read expansively to include almost any legal means to shelter the business from taxes.
Sure, any publicly-owned company has to be pretty straight with its shareholders and the regulators, esp. the IRS and after the Sarbanes-Oxley Act - there’s an honesty-inducing tension there between the shareholders who want more profits and cash flow; the market which will value the business on that basis but turn on anyone who can’t maintain the anticipated high levels for whatever reason, legitimate or not; and the tax man, who will collect more as a result of high valuations, and is skeptical of any attempt at ‘low-balling’ same. There’s more room for shenanigans in privately or closely-held businesses, but even there the IRS and the financing entities pretty much keep things on the up-and-up - there are usually enough legal and legitimate ways to accomplish the desired goals.
For example - and more ‘on-topic’ than I would have expected - just earlier tonight I read the following sentence in an August 1979 Trains article on KCS by Fred Frailey, at pp. 26-27 [emphasis added - PDN]: “Some KCS officials contend that Bill Deramus quit investing much money in his property after repeal of the Excess Profits Tax in 1953; before then, the story goes, he’d rather have put profits back into the railroad than to give them to the Government.”
In the early and mid-1980’s, I personally saw ConRail sink huge sums of its cash into upgrading Industrial Tracks and Secondary lines with new
The tax probably will get blocked in the senate by the opposition, As they hold the balance of power in the senate, which basically means whatever the liberals/nationals don’t like won’t get through. Just like our Carbon Pollution Reduction Scheme. Which is a good thing. Australia is becoming an over taxed country, thanks to Kevin Rudd, He believes a tax on everything will solve all our problems!!! The big mining companies, are less than happy about this proposal, and with the political clout they have, I doubt if this will get off the ground. If Rio Tinto, BHP Billiton, Fortescue etc left Australia or reduced their roles in Australia, it would hurt the economy too much.
Diningcar: There was a whole book written about the EAL fiasco. It was so bad at the time and some federal regulators were starting to be investigated but they all shut up when the first president Bush made a few strategic pardons.