Australia Passes 30% Mining Tax
Australia's senate has approved a 30% tax on iron ore and coal mining profits despite strong protests from global mining giants BHP Billiton Ltd. (Stock Profile - ASX:BHP & NYSE:BHP) and Rio Tinto Ltd. (Stock Profile - ASX:RIO & NYSE:RIO). Following a two-year battle with Australian mining companies, the tax is set to take effect on July 1st and is expected to raise $11.2 billion over the first three years.
Some feel the tax will hamper mining investment in Australia. Evy Hambro, resource investment chief of BlackRock Inc., the world’s biggest money manager, felt Australia had "dropped down" the global mining investment list because of the soon to be implemented mining profits tax and a pending carbon tax.
Fortescue Metals Group Ltd. (Stock Profile - ASX:FMG), the country's third-biggest iron-ore exporter, said the tax was “unfair, narrowly based, complex, inefficient and will reduce investment and future jobs in the Australian mining industry.”
Outside of Australia the sentiment may not be as dissenting. Adani Group, the largest Indian investor in Australia, said the new mining tax will not have any "significant" impact on its coal business. Adani Group, through Adani Enterprises, recently began a coal mining exploration program at the Galilee Basin in Queensland. "The law allows the full capital expenditure incurred to be set off from the profits derived from its mining operations in the year it is made, and any unabsorbed excess is carried forward."
Adani Group, which is diversified into energy, ports, shipping, mining, power generation and agriculture, said it plans to invest $6 billion in overseas expansion by 2015, primarily in its Australian mining and related assets.
The expansion of India, China and other emerging economies has boosted demand for resources such as iron ore and coal in Australia. Globally, Australia is the largest exporter of steel-making and energy-producing materials.
“We’ve got a spectacular resources boom,” Australian Prime Minister Julia Gillard said in an interview with national broadcaster Channel Nine television. “It makes sense to take some money from the turbo-charged section of the economy and share it more broadly around the nation and that is what the mining tax does.”