The world’s biggest mining companies including Rio Tinto, BHP Billiton and Xstrata have expressed their concerns about Australia’s proposed 40% tax on local mines, which could come into effect in 2012.
Rio Tinto, in response to the Henry Tax Review, which is investigating possibilities for the nation’s future tax platform, said the new resource rent tax would severely curtail investment and erode competitiveness in Australia’s mining sector.
Meanwhile, Xstrata said it is concerned the proposed tax will reduce the very cash flows that are reinvested in maintaining or expanding existing Australian mines and in developing new operations.
The resource tax sends a worrying signal and undermines Australia’s reputation as a stable investment destination, hampering the ability of mining companies and other investors to assess the basis for future long-term investment, Xstrata added.
BHP Billiton said it believes the implementation of a resource rent tax would result in a tax increase on its profit from the present 43% to about 57% from 2013.
The implications of the tax, however, are not yet fully known as the design, implementation and application of the tax is yet to be clarified by the government.