17/06/2010 - 00:00

Rudd stares into the political abyss

17/06/2010 - 00:00

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Kevin Rudd’s working hard to do himself out of a job.

Rudd stares into the political abyss

FOR reasons that remain murky, Australian political leaders are showing an alarming tendency to commit political suicide as we move through the early years of the 21st century.

Kevin Rudd presently shows symptoms of this affliction that, in 2007, ignominiously terminated predecessor John Howard’s 33-year political career.

Mr Howard became obsessively attached to being the one who would fundamentally alter Australia’s workplace arrangements – something his spin doctors dubbed WorkChoices.

Mr Rudd similarly seeks to be the one who’ll fundamentally alter Australia’s taxing of the wealth-generating resource sector – something his spin doctors dubbed the resource super profits tax.

That, in a nutshell, is the common thread linking the 2007 and coming 2010 federal election.

Both have demonstrated an inability to institute sensible consultative governance, something former Liberal leader Malcolm Turnbull shares with his obsessive backing of Mr Rudd’s other crusade – a destructive carbon tax that would further debilitate Australia’s resource sector.

What is it about these three overbearing individuals that they’ve even been prepared to trash their political careers?

Is megalomania their affliction?

Messrs Howard and Turnbull are forgiven because they’ve only been afflicted once – the former with WorkChoices, the latter by joining the Rudd carbon taxing crusade.

Both paid dearly: Mr Howard toppled as prime minister; Mr Turnbull unceremoniously dumped as party leader, after which he threatened to leave politics.

Mr Rudd still awaits his Waterloo even though going down the megalomaniacal path twice – firstly by crusading for carbon taxing, which he’s postponed until 2013, and secondly by finding another no-win crusade, super taxing mining projects federal treasury identifies as ‘super-profiteers’.

That, however, is only the beginning.

What commentators and the Liberal opposition haven’t yet alerted people to is the fact that the Rudd mining super tax is to be broadened to afflict several other sectors Treasury has already identified as super profiteers.

State Scene refers to the March 2010 Treasury-commissioned KPMG EconTech CGE Analysis of the Current Australian Tax System, which is the blueprint for the intended mining super taxing.

At page 36, and headed, Natural Resources and Other Generators of Economic Rents, KPMG’s boffins told the government that:

• “ …[I]n reality, excess returns do exist in some industries.

• “to identify the excess in an industry, the rate of return on capital in each industry was examined.

• “when this return has consistently been greater than the ‘normal’ rate of return on capital, then the industry may be making excess returns.”

So, which industries were identified for the Rudd government as deriving so-called excess returns?

“The following industries are identified as having ‘excess returns; that, for modelling purpose, are attributed to a fixed factor,” KPMG’s boffins wrote.

“Coal, oil and gas, iron ore, non-ferrous metal ores, beer, banking, and non-bank finance.”

Taking these in the order listed in KPMG’s report, this means all Queensland and NSW coal mining operations face paying 40 per cent tax above the 6 per cent bond rate.

In WA, Collie’s operations should know this.

‘Oil and gas’ means all future ventures on Western Australia’s North-West Shelf face paying the coming super tax.

Thirdly, ‘iron ore’ means all Pilbara and Geraldton’s Mid West projects are earmarked.

Will this hinder constructing the long-awaited Oakajee port near Geraldton?

Breweries also face being super taxed.

All banks – the Commonwealth, ANZ, Westpac and NAB, Bankwest, Bank of Queensland, Bendigo and St George’s Banks – should also ready themselves for a ‘super taxing’.

And finally, all so-called non-bank financial institutions, presumably finance and insurance companies, perhaps even superannuation funds will also be so taxed.

The Rudd resource super profits tax is therefore only the opening gambit in this strange new form of taxing.

But if mining, oil and gas projects are to be ‘super taxed’ why shouldn’t all other industries that KPMG’s boffins identified as super-profiteers not be similarly encumbered?

Ruddism is thus set to institute a dual-tier taxing structure upon designated sectors by collection of tax revenues from anyone identified as reaping so-called “super-returns.”

This is a milestone in Australian taxation history.

In the past, Canberra was content with only imposing corporate taxes upon business, with the exception being oil and gas following the Saudi Arabian embargo of the early 1970s.

Today we’re seeing Mr Rudd risking his political career so as to institute the beginnings of two-tier taxing.

Thereafter two-tier taxing will extend into brewing, banking and non-banking financial sectors. And after that, who knows? Perhaps even into personal income tax.

Two-tier taxing – traditional corporate taxes, plus so-called super profits taxes – means a massive transfer of funds from private hands (owners, shareholders and superannuant entitlements), to powerful Canberra bureaucrats, like Treasury chief Ken Henry.

News of this has travelled far and wide, including to Switzerland where a Stefan Bljörklund wrote to The Wall Street Journal (Asia Edition) on May 19 highlighting risks associated with the Rudd path.

He claimed Mr Rudd is implementing what’s called Swedenoid socialism, a variant that’s been rattling around Labor circles since the Whitlam years.

Readers curious about Swedenoidism in action can read Ronald Huntford’s riveting book, The New Totalitarians, on big-taxing Sweden.

Headlined, Rudd Wants to Turn Australia into Sweden, Mr Bljörklund wrote: “Australian Prime Minister Kevin Rudd’s idea of a ‘super profits’ tax on the mining industry ... is a typical stunt he learned when he was a diplomat in Stockholm.

“Since 1983, different Swedish governments have put a super-profits tax on hydropower.

“Before that, it was a cheap and reliable source of electricity for Swedish pulp, paper, steel and mining companies.

“Much of Swedish hydropower was built over decades by Swedish industrialists to secure energy supply for their manufacturing industry.

“But after the tax was introduced and raised almost annually, Swedish companies started to sell their heavily taxed hydro-power stations to other investors.

“Today most of the formally private-owned hydropower is owned by foreign state-owned power companies as Fortum (Finland) and Statkraft (Norway) and the privately held Eon (Germany).

“Electricity prices in Sweden are now as high as in Germany.

“The same thing happened when Britain’s Labour Party introduced a windfall profit tax on utilities.

“The tax depressed profit led to an exodus of British institutional investors from the sector.

“It was then easy for continental corporations like RWE and Eon (Germany), EDF (France) and Inberdrola (Spain) to buy them cheaply.

“Today almost all the British power companies are owned by foreigners, and the government has to make all kinds of tax concessions and subsidies to get them to invest in new plants in Britain.

“For Australia, a super profits tax on mining would make stocks in the mining companies cheaper as many private investors would sell out because of perceived political risk.

“State-owned Chinese and Indian corporations will then have a great opportunity to acquire a substantial part of Australia’s mining industry.

“In the long term, these countries will then have more clout in dealing with the Australian government than private investors.”

Whether or not Mr Rudd falls over this year or foreigners start cheaply snapping-up Australian resource companies, it’s hari-kari either way.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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