Double taxation ?

There is an ominous warning to investors hidden in this Federal government mining tax bill, about to become law in the next few hours.   It contains no " franking provisions " to stop the profits being doubly taxed - once when the company submits it's annual tax return, and then again when the dividend reaches investors.

Australia is one of the few countries in the world to offer franking credits when a company has fully paid all aspects of tax liable on the profits it earns.   It was deemed unfair to tax those same profits twice - once at company level, and then again when a dividend passed into the hands of those who held shares in the company.

In particular, franking shelters those retirees who do not draw the aged pension because they invest their superannuation privately and are supporting their own retirement from their own funds.   They are not a drag on the public purse and franking recognises this benefit to treasury.

Establishing new mines is usually a huge capital requirement   Franking is a big inducement for those with private retirement plans to participate because it offers a better return than treasury notes, bank bills or fixed interest - but it also contains a risk factor.    Not all mines are successful - and it is still a case of " investor beware ! "

This omission from the new mining tax raises a troubling question.   Is the government walking away from franking as a tax option ?   Socialist governments are usually hostile to all forms of self funded retirement because they consider such people " Silvertails ".

Is this the start of a new social policy of " wealth distribution " - or is it an instance of a government so desperate for money that it is joining the rest of the world in taxing anything and everything - with no social conscience on the " double taxation " issue ?

That is certainly a question the investment industry will want to see settled.   If such change is in the air, it will have a drastic effect on advice given - and the ongoing financial impact will be felt across many levels of society.   Finance flows will change - and that could retard the financing of many industries.

If this is a basic change of taxation policy - now is the time to drag it kicking and screaming into the open - where it can be evaluated - and subjected to public judgement !