31 May 2010

George Fane on the resource rent tax

Distinguished ANU economist George Fane does a brilliant demolition job on the Government’s proposed Resource Super Profits Tax (RSPT) in today’s edition of The Australian (see Reputation of the nation on the line here).

Fane comments:

The resource rent tax looks like the answer to a Treasurer's prayer: a non-distorting tax that allows the community to share equitably in the value of resources that rightfully belong to the community. Unfortunately, it is a chimera.

Later in the piece:

If the guarantee that future tax credits will be refunded is really cast-iron, the Treasury should issue the bonds needed to pay cash refunds to the companies for initial losses in the year when they are made. The companies would presumably prefer the cash to the promise, so everyone would be better off. The only benefit to the government from not cashing the credits arises because the guarantee is not cast-iron.

This is obviously the case, since the RSPT rules are so complicated that they could be changed with negligible electoral consequences. To adapt an aphorism attributed to Ed Murrow, anyone who is not confused by the RSPT cannot have understood it. The accounting rules are too hard for economists, the economics is too hard for accountants and it is all too hard for everyone else.

There is plenty more, and the article is well worth reading in full – access it here.

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