Compose a 1750 words essay on Concepts that are Relevant to the Tax on Super Profits of Mining Companies Debate. Needs to be plagiarism free!
The normal basis for the corporate income tax is comprehensive income. It is generally seen as the ability to pay. All income- including dividends, interest, and capital gains are taxed at the same rate. As for the Australian mining industry, corporate taxation should not be incorporated in the same way because of two reasons. Firstly: it is foreign owned and secondly. it is a high-risk industry which involves long gestation periods with no profits. The same principle of corporate taxation is applied for taxing super profits and since their profits are above a certain threshold, the tax rate is higher.
The government also taxes capital income as rent. These rents originate from imperfect competition and agglomeration externalities which allow the firms to earn an above-normal return. Taxing for mining firms is done very efficiently. It won’t be applied to the margin of new firms. If it reduces the value of the firm, it will reflect on share prices and hence, it only reduces the wealth of existing shareholders. (MOOIJ)
According to the government, the Government bond rate (GBR) is a fair level of profits. Anything above it is classified as super profits and should be taxed at a higher rate of 40%. Arguments against the Resource Super Profit Tax (RSPT) raise the point that since the GBR is a benchmark for a nonrisky tax flow, it should not be the same for a risky venture. The government should at least fix a higher threshold level for mining companies profit after taxing it at a higher rate.
Though the Government assures that 40% of the losses will be refunded, if the Government is taking a 40% stake in profits and losses, it should also contribute 40% towards the equity or initial capital. This is not the case, however.
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