Australian Miners Furious over Double Tax Burden
Source: The Australian, Andrew Burrell and David Uren (4/29/10)
"[Australian miners'] profits face a multi-billion-dollar hit from the introduction of a resource rent tax."
But while major mining companies prepare to fight any moves to introduce a "double tax," Kevin Rudd yesterday signaled new tax breaks for small miners.
Experts believe this will include the introduction of "flow-through share schemes," which allow junior exploration companies to pass on their tax losses to shareholders.
The Prime Minister yesterday set out the arguments the government would use to justify the new federal tax, which is likely to be imposed on top of existing state royalties. This came as investment banks Morgan Stanley and Merrill Lynch issued research papers predicting that a resource rent tax of 40% on profits would hit long-term earnings of Rio Tinto by up to 30% and BHP Billiton by 19%.
Atlas Iron Chief Executive David Flanagan said last night the prospect of a "double tax" would be devastating to his fledgling West Australian iron ore mine, adding: "I like the idea of a resource rent tax which takes the place of a state royalty—but I don't want both."
The mining industry has long campaigned for the introduction of flow-through share schemes.
Labor promised in opposition it would allow the "selective use of flow-through share schemes for smaller operators in the gas, oil and mineral exploration industries." The proposal was ultimately rolled into the Henry Review, but Rudd said yesterday the government would "help to broaden and deepen the mining sector in Australia" by supporting smaller operators.
Big mining companies are given a tax deduction for money spent on exploration, but many smaller miners never generate sufficient income to claim the concessions.