Treasury secretary Ken Henry believes that the mining tax will fail if financiers put no value on tax credits for projects that fold, Fortescue chief Andrew ‘Twiggy’ Forrest said.
The mining magnate said Henry described the tax to him in detail and that it relies on the “critical assumption that the so-called guarantee of 40 per cent of losses in bankruptcy actually has a value to financiers”, Forrest told ABC Radio.
"If it doesn’t, then in Ken Henry’s own words, the logic of the entire tax collapses and this is just a 40 per cent take, which of course will then damage the industry."
The 40% take credit guarantee on losses would be worthless to the mining industry as it would be useless to financiers deciding on loans.
While it works on the books for economists, this tax does not work in reality, he said.
Forrest said that Government will have to amend the current proposals in the tax, but instead the Government is attacking the mining industry instead of admitting it made a mistake with the tax.
These statements follow on the revelation that the Federal Government had approved advertisements attacking the mining industry’s response to the proposed tax as poorly constructed and damaging to the mining sector, prior to the release of the tax review, despite claiming the advertisements were a result of the mining industry’s ‘misleading’ responses.
“Well, I’ve thought enough is enough, I’ve got to get out there and say Ken Henry himself does not believe this tax works if they tinker with it," Forrest said.
He went on to say that this tax will drive Australian miners overseas for potential projects, a view held by both Cape Lambert’s chief Tony Sage and Gulf Resources head Scott Reid, both of which are currently looking at expansion in West Africa and the Sub Saharan region.
Speaking to both miners, they told Australian Mining that the Mining Super Tax that has been proposed in Australia makes companies perhaps look further afield for identifying new assets which will not have the same financial risks associated with prospecting within Australia.