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Miners vent fury at Australia’s tax

May 13, 2010

“Plans for a 40 per cent levy on profits have led to uproar within the sector.
Canberra threw a grenade into the heart of Australia’s profitable mining sector this month with its plans for a new 40 per cent tax on “super” profits generated by all resource companies operating on the countries soil. Uproar in the mining industry ensued.”

Source: Financial times, May 12 2010

Observations:

  • Kevin Rudd, Australia’s PM, argues that the natural resources in Australia primarily are owned by the people, and thus the money earned by extracting them should be returned to the people
  • Mining companies are still protesting and lobbying against the proposed tax increase. The companies are hoping that the government will change or withdraw the proposal and are at the same time gaining public and politic goodwill for the future, as general opinion is the industry will be hit hard.

Implications:

  • Apart from the polital turmoil, which will eventually ease, the tax will have a series of effects on the competitive position of Australian mining. Ongoing operations, capital investments and Mergers & acquisitions will all be effected in their own way, as depicted in the figure below.
  • Each of the industry implications will in turn have effect on the income of the Australian government, being very positive in the short term, but potentially endangering income in the longer run.

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  1. June 4, 2010 at 11:25 am
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