Australia's tax reform to impact on mining industry

08:24, May 04, 2010      

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The Australian federal government said on Sunday it will impose taxes worth billions of dollars on mining companies to ensure the profits of an Asia-driven commodities boom were shared fairly.

Voracious demand for commodities such as coal and iron ore from Asia has seen Australia ride out the global downturn in better shape than any other advanced economy, Australian Finance Press ( AFP) reported.

But the government said the state royalties paid by companies such as BHP Billiton and Rio Tinto had not kept pace with surging profits and needed to be revised to ensure the benefits of the boom were shared with the nation.

"This long-term plan released today builds a stronger economy by using super profits earned from the resources owned by all Australians," Prime Minister Kevin Rudd told AFP.

The government will place a 40 percent tax on above-normal profits of mining operations, using the money to pay for pensions, infrastructure spending and to fund lower company taxes, particularly for small business, Rudd said.

The move was one of the biggest changes announced by the Australian federal government following the release of the long- awaited Treasury Secretary Ken Henry's tax Review on Sunday.

The Henry tax review has revealed on Sunday after four months of consideration by Treasurer Wayne Swan.

Minerals Council of Australia boss Mitch Hooke has warned the tax would impact anyone with superannuation, suppliers, shareholders and also those in rural areas, but most concerning was how it will affect investment.

"If you don't get the investment environment right, the industry won't invest," Hooke told Australian Associated Press.

The West Australian-based Association of Mining and Exploration Companies has warned the resources tax would bury the industry, while Western Australian Premier Colin Opposition Leader Tony Abbott has labeled the new measure a "great big new tax".

"If you are determined to kill the mining boom stone dead you could hardly of precisely calculated a measure to achieve it," Abbott said.

"I am deeply and profoundly hostile to the idea of a great big new tax like the Emission Trading Scheme on the most important and productive part of our economy."

It was expected that the new tax reform will raise some 3.0 billion dollars (2.78 billion U.S. dollars) in the first year after its planned introduction in 2012.

The tax reform will be offset by rebates on exploration for miners and a new infrastructure fund which had been expected to bring the most benefit to resource-rich areas which will receive new roads, railways and ports.

"Companies will not pay the tax until after they have provided shareholders with the normal return on capital investments and then only on any additional profit," Treasurer Wayne Swan said.

In unveiling its plans for a tax system revamp, Swan also said the government will lift the compulsory superannuation contributions that employers pay into workers' pension funds from nine to 12 percent by 2020.

Swan, who will release the national budget on May 11, has described the proposals as historic but said they could not go ahead without the mining tax.

Swan said the government, which faced an election later this year, needed to manage the mining boom so that it produced long- lasting benefits.



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