Sunday, May 2, 2010

Will Today's Tax and Superannuation Proposals Actually be Implemented?

Based on the Rudd government's record to date I don't expect these "reforms" to be implemented as announced. The Liberal-National Coalition will oppose them. I expect that the Greens will like them. So, based on the current composition of the Senate, it will depend on Xenophon and Fielding and I have no idea what they'll think. Of course, the legislation would likely wait till after the election. The Henry Review argued for a normal return on capital equal to the long-term government bond rate in order to compute which part of profits are "super profits". That seems very low. It makes no allowance for a risk premium on equity. So I'd expect that rate to be raised and the tax rate possibly to be lowered if this is ever going to be enacted.
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2 comments:

  1. SriramMay 2, 2010 at 9:23 PM

    I think this is just a political stunt. As Rudd and Labor party's popularity is declining, this is a move to create a wedge issue which would appear favorable to the working class. Given the un-popular labor governments in NSW, VIC and recently QLD, this seems to be a desperate move to win back sliding voter support.

    Of-course this tax policy will not be implemented in its current form even if labor wins with a thumping majority in 2010.

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  2. David SternMay 2, 2010 at 9:42 PM

    So a good time to buy mining shares? :) Or will everyone make the same assumption as you?

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