Strong opposition to proposed Australian mining tax

Finance

Australian mining companies are calling for clarification after it was revealed they may be hit by a new federal tax on minerals. These charges are reported to be much higher than the current state-based royalty system.

Mining executives and industry lobby groups have warned that the new tax would hurt the country’s resources sector.

The Sydney Morning Herald reports that the Henry Tax Review might have recommended a new rent tax of 40% on minerals mined in Australia, replacing the current royalty system, which taxes 2-10% of revenue. The report suggested that the new tax would be modelled on the existing petroleum rent tax.

Andrew Michelmore, chief executive of China Minmetals Corp’s Australian subsidiary, Minerals and Metals Group, called for more information on potential tax changes. He said they could have significant impact on investment in mining and exploration.

“You need 10 years’ life to get your money back, so you want long-term assets, but you need companies who are willing to put the investment in to get the production and get the employment that goes with it,” he said while announcing his company’s quarterly production figures this week.

“That is the real benefit of the industry, and if you want to go and hit it with more taxes you kill the goose that lays the golden eggs.”

The chief executive of industry representative, the Association of Mining & Exploration Companies (AMEC), Simon Bennison, said selective leaking of parts of the review by the federal government and subsequent speculation were both irresponsible and unwise.

“Ill-informed speculation about what might, or might not, change as a result of the Henry Tax Review only serves further to undermine already vulnerable investor confidence,” he said.

“The ability of emerging mining and exploration companies to raise capital often depends on the confidence of its investors. Uncertainty in the regulatory environment has a direct and detrimental impact on that confidence.

“The global financial turmoil in recent times, combined with increased competition from other parts of the world means the industry can ill afford any more pressure on investor confidence.”

Meanwhile, Macquarie Bank said the adoption of a resource rent tax to replace mining royalties was unlikely and would be unworkable, according to a report on Dow Jones Newswires.

In any event, a proposed tax change would face strong opposition from the mining states of Western Australia and Queensland, who would likely lose out under a new regime. Australian mining heavyweights BHP Billiton and Rio Tinto were quiet on the implications of a tax change.