hugeorgans - i'd like to run a few things past youfirstly - this...

hugeorgans - i'd like to run a few things past you

firstly - this is not a RENT tax because a federal government cannot impose a rent tax on onshore mines because they are owned by the individual states. that's why that little grub rudd had to impose a SUPER PROFIT tax. the only way a federal government can get its hands on any mining goodies is by taxing a miners income.

secondly - try this scenario. suppose for example that a chinese company buys fortescue - in order to avoid the SUPER PROFIT tax they make it so that the new chinese owned fortescue doesn't make any profit. quite simply done by selling iron ore back to china at a very cheap price which forces bhp and rio to lower their prices. net result is a lose-lose outcome - less RSPT from bhp and rio and none from the new chinese fortescue.

and i guess someone could have mis-interpreted the body language but get this from michael pascoe in the age today.....

There should be room to negotiate on the cost of capital component in the government's resources super tax formula to make it more realistic, but first the government would need to understand what that is. There is an email circulating with these comments attributed to a Macquarie Private Wealth Premium Research subscriber communication:

''The truly scary aspect of this is the lack of understanding from Rudd and Swann (sic) towards equity risk premiums. The equity risk premium is the extra return an investor is paid in return for taking equity risk. The new tax is slated to apply if a business earns more than a 6% return (equal to the rate paid on 'risk free' government bonds). Effectively they are saying we should not bother investing in industry that offers a better return than government bonds or they will double tax you.

''Our strategist asked Treasurer Swann a question yesterday on this issue and asked why the tax kicked in when returns exceeded the bond rate rather than the bond rate + an equity risk premium of say 5% (otherwise known as a companies cost of capital). Swann did not understand the question no matter how it was re-phrased - in other words the treasurer of Australia does not know what the cost of capital is for Australian companies. This is economics 101!''

Wayne Swan gets his chance tonight and over the rest of the week to demonstrate whether he does understand the question, but in an election year with the government sliding in the polls and the opposition capable of promising anything, primary school politics beats economics 101 every time.

Kill the RSPT!!!!