The mining industry has reacted angrily to the Federal Government’s decision to implement a 40% on resource company profits.
The mining tax reform was one of many recommendations in Federal Treasury Secretary Dr Ken Henry’s review into Australia’s taxation system.
The industry’s main representative, the Minerals Council of Australia (MCA), has been leading the criticism, blasting the move as a “revenue grab.”
“It is an unprecedented double-tax that will hit the industry’s workforce, the millions of Australians with shares in superannuation or minerals companies and the thousands of small businesses that service the industry,” MCA chief executive Mitchell Hooke said in a statement.
“The real work on the proposed reforms will start tomorrow when the Government sits down with industry and gets a real-world understanding of the high-risk cyclical nature of the mining industry and the full impact of what they have announced.”
“We will work with the Government to get the design and rate of a resource rent tax right.
“If we don’t get the design and rate of this right, it will destroy value, slow investment and increase sovereign risk in the Australian minerals industry.”
Prime Minister Kevin Rudd responded to the criticism this morning on ABC Radio, saying most the profits from Australian resources were being distributed overseas.
“Over the last decade the mining companies generated $80 billion in higher profits,” he said.
“At the same time, Governments, on behalf of the Australian people, received only an additional $9 billion.
“BHP is 40% foreign owned, Rio Tinto is more than 70% foreign owned.
“That means these massively increased profits … built on Australian resources are mostly, in fact going overseas.”
Treasurer Wayne Swan also told ABC Radio that the current royalty system had been too generous on certain companies.
“Some companies will pay a bit more of that there is no doubt, because they have been given very generous treatment over recent years because of the failures of the royalty regime,” he said.
The Queensland Resources Council (QRC) and the Western Australian Chamber of Minerals and Energy (CMEWA) have also questioned the changes.
“The federal government has rolled the dice on the future of more than $100 billion worth of resource sector projects in Queensland still subject to final investment decisions,” QRC chief executive Michael Roche said.
“There is a strong perception among QRC members that the federal government believes the resources sector has a limitless ability to pay more and more tax, particularly after it was targeted to cross-subsidise handouts under the failed CPRS.
“The Federal Government has to implement a final package that will stand up to the test of ensuring Queensland’s resources sector stays globally competitive.”
CMEWA chief executive Reg Howard-Smith called the move a “$9 billion hand brake on the resources industry and therefore the national economy.”
“We had hoped the Henry Tax Review would streamline the Australian tax system and promote growth, rather it seems to have added complexity and will limit growth,” he said.
“It has singled out the resource sector for a 40% supertax; a tax on an efficient and globally competitive industry which carried the Australian economy through the financial crisis.
“While we are still trying to understand the complexity of the new reform it appears it will act as a disincentive for investors to develop new or expand existing projects.”
NSW Minerals Council chief executive Dr Nikki Williams said the State’s economy could go from a “so-called two speed economy to a no-speed economy.”
“It is horrifying to think that this short-sighted grab for cash will be at the cost of the long-term sustainability of the NSW and Australian economies and the many hundreds of thousands of jobs the industry supports,” she said.
However, Construction Forestry Mining Energy Union (CFMEU) president Tony Maher has welcomed the proposed changes.
“It is exactly what is needed to give all Australians a share of the wealth,” he said.
“The Federal Government should consult with business, unions and community groups about targeting assistance for mining communities most affected by mining operations.
“Mine workers and their families will not buy any job scare campaign run by the well-heeled executives fighting the resource super profit tax.”