Australia plans 40 percent tax on mining profits
By ROD McGUIRK=
Associated Press Writer=
Australia would heavily tax the
booming profits of its mining companies under a tax system overhaul
proposed Sunday that also would invest in infrastructure to support
mining operations and reduce corporate taxes.
The new 40 percent tax on resoure profits targets industries
that have grown rapidly as they've produced the raw materials that
feed burgeoning Chinese and Indian manufacturing demand.
Mining royalties currently paid to Australian state governments
do not reflect rising commodity prices. The government says mining
profits rose by 80 billion Australian dollars ($74 billion) in the
past decade, yet government revenues from resources increased by
only AU$9 billion.
Andrew Forres, chief executive of Fortescue Metals Group Ltd.,
last week warned that higher taxes on mining could "kill the golden
goose" that had kept Australia out of recession during the global
economic downturn. Mine companies also say higher taxes would stifle
investment in the resource sector and cost jobs.
Thetax overhaul Prime Minister Kevin Rudd proposes requires
Parliament's endorsement to become law. It would introduce the
so-called Resource Super Profits Tax in July 2012. The company tax
rate would be cut from 30 percent to 29 percent in July 2013 and to
28 percent a year later.
The government forecasts tht the cut in company tax combined
with the mining tax will increase Australia's gross domestic product
by 0.7 percent a year.
"These changes will not be welcomed by every business or every
interest group, but they are the considered, responsible changes we
need if we are to turn our success during the gloal recession into
enduring gains for our economy, our people and our nation," Rudd
said in a statement.
Treasurer Wayne Swan told reporters he could not say whether tax
legislation would be introduced to Parliament before national
elections are held at a date to be set late this year.
Under the tax overhaul, resource-rich states would continue to
reap mining royalties, but the federal government would refund those
costs to mining companies before calculating their federal tax debt.
The tax would be levied on profits after all the costs of mining
operations, capital investment and dividends to shareholders are
deducted.
Marginally viable mine companies would potentially be better off
in cases where the costs of extracting minerals barely cover royalty
charges because of a price downturn or when the ore deposit is
almost exhausted.
About AU$5.6 billion of the mining tax revenue would be spent
over a decade on public infrastructure critical to the industry such
as ports, rail and roads.
The government argues the tax shift would prevent a "two-speed
economy" emerging in Australia where non-resource industries such
as manufacturing, construction and tourism cannot attract investment
or staff because they cannot afford to match the lucrative wages
offered by the mining industry.
Also as part of the tax overhaul, the government would increase
the proportion of salaries that Australian workers must save for
their retirements from the current rate of 9 percent to 12 percent
by 2020.
