Bankers and miners

Here is the quote in question:

THE mining company owned by billionaire Andrew “Twiggy” Forrest has not paid any corporate tax for seven years.

And the high-profile critic of the Federal Government’s proposed mining tax has admitted it may not be liable to pay that either.

Mr Forrest is Australia’s richest man, worth an estimated $6 billion, and recently acquired a $50 million private jet. His Fortescue Metals Group is valued at $16 billion.

Fortescue Metals’ tax manager, Marcus Hughes, conceded to a parliamentary committee yesterday: “We have not cut a corporate tax cheque to date.”

But Mr Hughes said that after writing off exploration and development costs since 2003, the company would be “paying our first company tax cheque effective 1 December this year”, of $100 million.

He expected it would pay $800 million next year.

http://www.heraldsun.com.au/news/more-news/twiggys-tax-bill-a-blank-cheque/story-fn7x8me2-1226190659022

While it is true that Fortescue paid no company tax for 7 years, the exploration and development cycle of the company appears to be levelling off. At that point Fortescue starts behaving like a mature company, claiming a more normal menu of tax minimisation loopholes.

Of interest is this website:

http://www.spankyourbank.com.au/home

which when compared with the data in this website:

http://www.fmgl.com.au/investors_and_media/Top_20_Shareholders

demonstrates the level of control of Fortescue by Australia’s Big Four Banks, and by some of the biggest banks in the world.

These websites also help to demonstrate how Australia’s Big Four are part owned by the same huge banks that own a large part of Fortescue.

These data, in turn, help to clarify how important the Australian mining sector is in the world economy and the world financial system.

su
March 9, 2012 at 10:12 am | Permalink
A deferred liability has not yet been paid, Duncan, and in practice, these liabilities can be deferred almost permanently. A great deal of strange asset shuffling between different entities seems to happen with that outcome in mind. I imagine that the resources sector is no less keen to go to the limit of the law in their accounting practices. Why do you mention royalties, they are not a tax?

Roger Jones
March 9, 2012 at 2:28 pm | Permalink
And to put all that in perspective, in 2009-10 the mining industry achieved about $400,000 EBITDA (gross earnings) per employee. Similar figures for manufacturing were $34,500, ag/forest/fish $24,500, education (private) $4,500, average $32,000. The only sector that came close was power, water and waste – mainly through power (the other licence to print money in the lucky country).
If we don’t get investment in high employment sectors, if we forego proper rents for non-renewable natural assets as a country, if we assume that the mining boom will prop up the rest of the economy (the data suggests otherwise), we’re stuffed.

alfred venison
March 9, 2012 at 3:00 pm | Permalink
dear adrian
thanks for the nod. its great to know i’m (a) not mad, or (b) not mad alone.
yours sincerely
alfred venison

Chris
March 9, 2012 at 3:48 pm | Permalink
su @ 54 – royalties are still an revenue stream for governments though which they use to pay for public services. And I bet they don’t count it as selling of an asset when it comes to budget time.

su
March 9, 2012 at 5:20 pm | Permalink
@ Chris Yeah sure, but they are collected by the states and have nothing to do with corporate tax, the comment @51 just didn’t seem to follow from Zoot’s comment about corporate tax.

There is a very good reason why R&D is always cited as a higher figure than the corporate tax, the ATO is said to be scrutinizing all of this, I am sure the renewed vigour of the tax office is causing some of this squealing from Twiggy and co.

Mercurius
March 9, 2012 at 9:00 pm | Permalink
Well I for one am glad that at least Duncan is prepared to think of the billionaires’ welfare.

I’m sure they will be every bit as compassionate and generous in looking out for his.

duncan
March 9, 2012 at 9:52 pm | Permalink
Mercurius,

the mining magnates aren’t looking out for me, but they’re growing the pie.

That’s the important concept that many here don’t seem to grasp.

Mindy
March 9, 2012 at 9:57 pm | Permalink
They might be growing the pie but they’re not sharing it.

Fran Barlow
March 9, 2012 at 11:42 pm | Permalink
They might be growing the pie but they’re not sharing it.

They aren’t growing the pie. They are eating it from the fridge in the middle of the night and reacting with defensive guilt at those wondering where it all went the next morning.

Mercurius
March 10, 2012 at 6:29 am | Permalink
Duncan, they’re walking off with the pie and leaving a few crumbs for you and the rest of your family to fight over, and you think this is good and right and the Natural Order of things, and the Way It Should Be, and you are grateful to the generous lords and masters for leaving such delicious crumbs, and you thank them humbly, like the obedient little serf the neo-feudalists have trained you to be.

That’s an important concept that you don’t seem to grasp.

Katz
March 10, 2012 at 9:27 am | Permalink
Those big banks that own a large slice of Fortesue Metals won’t make a zack from their investment in the company until it declares a dividend or until they sell their holding for a capital gain.

Alternatively, Fortescue can suppress their profit margins inside Australia by selling their ore for less than market price and have the elevated level of profit declared under a low cost tax regime. That being the case, it is hard to see why those big banks would see ownership of Fortescue as being an attractive commercial proposition.

Whatever, those figures cited by Roger Jones above demonstrate how disconnected the mining sector is from the rest of the Australian economy.

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