FT.com : Mining trio unite against Australian tax
Source : FT.COM
Date : June 17 2010
Three of the worlds biggest mining companies stepped up their unprecedented joint campaign against government policy in Australia on Wednesday.
Rio Tinto ,BHP Billiton, and X STRATA issued a statement saying ,their executives had met Australian officias and pressed them to address the industrys three most serious concerns about labor governments proposed “SUPER PROFIT TAX ON MINERS”.
“There is no formal acknowledgement from government that these key issues will be addressed,” the three companies said in a rare joint statement.
It is the companies’ latest display of frustation over what they see as Australia’s unwillingness to open real negotiations over the tax. If it is implemented in the proposed form, the tax rate on miners would in effect rise as high as 57 per cent. This compares with an average Australian tax rate over the past five years of 42 per cent for BHP and 35 per cent for Rio, according to company statements.
A total tax rate of more than 50 per cent, the three miners claim, will make some projects viable and encourage capital flight to countries charging a lower tax rate.
Australia is an important global exporter of commodities such as iron ore and coal. The tax proposal could significantly affect all three companies’ profits after 2012. Rio stands to take the biggest hit, as its Australian iron ore mines generated the majority of the group’s profits in 2009.
Since the “resources super profits tax” was announced on May 2, government officials have met mining companies several times. The government and the miners disagree on who has gained the upper hand during these meetings.
Mining executives say the consultation sessions are unproductive, focusing on how to implement a policy that officials present as a fait accompli.
With the prospect of negotiations and compromise seemingly blocked for the time being, the big miners have been making their annoyance public.
Rio on Wednesday followed the example of BHP by writing a letter to its shareholders. The super-profits tax was “developed in a vacuum and is divorced from the day-to-day realities of business”, wrote Jan du Plessis, chairman.
BHP has been holding shareholder meetings across Australia to “explain” the tax’s shortcomings, in a format similar to US town-hall meetings.
The meeting on Wednesday between the three miners and government included Marius Kloppers, chief executive of BHP.
The companies said they brought up “three fundamental areas of concern” including the need to make any tax apply only to future projects. Applying sharply higher taxes to existing projects is unreasonable, they argue, because billions of dollars have already been sunk in to projects assuming a certain return based on factors that include a fixed tax rate.
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