Western Australia mining companies on Thursday called on Prime Minister Kevin Rudd to the proposed 40% tax on profits funds scrap. A group of miners, including iron ore producer Fortescue Metals, BC Iron, Brockman Resources and Gindalbie Metals, said that the implementation of the proposed super profit tax (SPT) would be “serious consequences” for investments in the sector, which in time would have for processing. He argued that the structure of taxation meant that the government had “forced” himself among the companies developing new projects or expansion plans and their sponsors.
Swan Gold chairman Michael Kiernan said that smaller companies, who in the past struggled to raise capital in the Australian market, would find “almost impossible” to increase local funding, if the tax was imposed.
“The truth of the matter is that the projects now in the works will arise and go, but I can tell you that we now shift our focus to Indonesia,” he told journalists in Perth.
Brockman MD Wayne Richards agreed with Kiernan, saying that the SPT would be a significant impact on the NPV of the projects thus creating a challenging environment for the company to raise capital.
“It’s only the best projects that will survive, and there is a chance that companies will have to invest offshore, with higher capital charges, to ensure funding for their projects.”
The mining sector is currently highest taxed industry in Australia, at an average rate of 43% over the past nine years. The imposition of the new super tax will increase the total tax on the industry 57%, making it the highest taxed industry in the world resources and potential of the country enabling companies and their products competitive on world markets.
“International markets are closely watching Australia and its investment profile going forward,” said Fortescue Executive Director Russell Scrimshaw.
“The government is liable to kill as quickly as possible, so that projects of junior miners and Fortescue extension project can continue with a clear picture of the game that we play.”
Fortescue director Andrew Forrest said the company every intention of completing the expansion of the program was, however, he called on Canberra to scrap what he called a 40% nationalization of mining called.
Forrest noted that it “incorrectly described” super-profits tax on the blue-collar workers could affect when the industry has moved offshore, and the Australian industry shrank.
The group said that imposing a tax on the super minerals sectors a narrow basis for the revenue expenditure of the general fund, where revenues sustainability issues for the government to set.
The cyclical nature of the mining sector, when combined with the brakes of the super-tax would place on growth was probably significantly reduce the revenue windfall from the government over time, the miners claimed.
Rudd met with representatives of the mining industry earlier in the week to the new tax to be imposed in 2012 to declare.
source:miningweekly
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