BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Xstrata Plc (LON:XTA) said today that they were encouraged by the Australian Federal Government's announcement that it proposes to replace the Resource Super Profits Tax with a Mineral Resource Rent Tax (MRRT). The revised plans were set out by new Prime Minister Julia Gillard, who appears to have taken just over a week to sort out a simmering two-month dispute that was widely perceived to have cost her predecessor, Kevin Rudd, his job in recent elections.
The Australian Government had originally planned to impose a new 40% resource rent tax on the mining industry in a move that could have netted A$12bn during its first two years. BHP, Rio and Xstrata all baulked at the proposals, pointing out that that multi-billion dollar, long-term investments in the Australian resources sector were at risk.
In a joint statement today, those companies said that they had consistently stated that any new tax should not be applied retrospectively and that a competitive effective tax rate should not disadvantage Australia as an investment destination. They said that as a result of constructive discussions, the proposed new tax will apply only to iron ore and coal resources from 1 July 2012. The companies agreed that the proposal presented by the Government represented “very significant progress” towards a minerals taxation regime that satisfies the industry's core principles. They added that they would continue to work constructively with Government to ensure that the detailed design of minerals taxation maintains the international competitiveness of the Australian resources industry into the future.
Under the new plan, the new resource tax will apply from 1 July 2012 only to mined iron ore and coal. All other minerals are excluded. The rate of tax will be 30% applied to the taxable profit at the resource.
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