Mining giant Rio Tinto has warned that all capital spending in Australia is under review following the Government’s decision to introduce a Resources Super Profits Tax, but the Treasurer Wayne Swan has hit back, claiming mining companies currently pay an effective tax rate of just 17%, well below the 30% company tax rate.
Speaking to reporters ahead of Rio Tinto’s annual general meeting, chief executive Tom Albanese said he had ordered his Australian managers to review all Australian mining projects on a worse-case scenario basis.
“This is affecting our Australian businesses and investment decisions as we speak,” he said, adding that the introduction case had become Rio’s “number one sovereign risk issue on a global basis”.
Albanese’s claims backed those of Fortescue Metals Group chief Andrew Forrest, who said yesterday that foreign investors were already “fleeing” Australia over the introduction of the tax.
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“You can see it in the share price of those companies with offshore assets, they’re staying very stable.”
“If you look at those companies with Australian assets like ours, generating Australian jobs, generating Australian tax, generating Australian royalties for Australia, we are the ones who are getting absolutely hammered.”
Last week, Forrest was forced to put two expansion programs on hold, putting up to 30,000 new jobs on the backburner.
However, Treasurer Wayne Swan is continuing to lash the miners over what he calls their “campaign of fear” and has used his weekly economic note to dispel what he calls the “myths” over the super profits tax.
Citing independent research undertaken as part of the Henry Review, Swan says “that in Australia, wholly-domestic mining companies paid an effective tax rate of only 17% and multinational mining companies paid an effective tax rate of only 13%…”
“Compare that to wholly-domestic companies in the retail industry which pay 27 cents of company tax in each dollar, or those in the manufacturing industry which pay 25 cents in each dollar they earn.”
“In our tax system, an ordinary worker who earns an extra dollar through their hard work pays higher tax, but a mining company that earns massive amounts pays the same flat, low rate of company tax. That’s simply not fair on the Australian people, which is just another reason we are so determined to deliver on our historic tax reforms.”
While some miners have criticised the lack of real consultation on the tax, Swan says he has already met with eight large mining companies and will meet with 10 more in the coming weeks”.
- The Government appears determined not to budge on the 40% rate under the tax proposal, but has flagged that other parts of the tax are up for negotiation.