The huge outcry against the new resource tax proposed by the Australian Government continues. It should be replaced with a profits-based regime – but not the scheme currently proposed by the Federal Government, according to the South Australian Chamber of Mines and Energy (SACOME). SACOME issued the plea today just days after warning that up to A$40 billion worth of mining projects in South Australia could stall because of the proposed Resources Super Profits Tax (RSPT). SACOME’s Chief Executive Jason Kuchel, said “Proper consultation by the Federal Government with the Australian resources sector is the only way now to make a transition to a fair and workable profits-based regime. “Had the Federal Government initiated this consultative interface in the first place, the current taxation impasse between the nation’s mining sector and the Government over the contentious proposed Resources Super Profits Tax (RSPT) could have been avoided. The industry is not opposed to tax reform or a transition to a profit-based tax regime on resources. The industry generally acknowledges that state-based minerals royalties systems in Australia are now outdated, unnecessarily complex, ad hoc and differ from state to state.
“A well designed profits-based scheme has the potential for more equitable taxation, while protecting the international competitiveness of our mining sector. It could provide differentiation across the resource commodities spectrum where extraction costs and realisable value vary wildly. However, the scheme currently proposed adds to the complexity and imposes an unrealistic burden on projects.
“Delays by the Federal Government in making substantial amendments to its RSPT are costing the industry in real terms, as existing and potential investors head for more favourable investment destinations overseas – leaving the Australian resources sector to languish in uncertainty. Furthermore, State Governments are rushing in to shore up their share of the tax pie by in some cases, increasing royalties ahead of the proposed 2012 RSPT rebates.
“Any increase in South Australia’s royalty rates will only further dampen investor confidence in the sector in the foreseeable future. This would be yet another unwanted ramification of the broader RSPT proposals. SACOME proposes that any profits based regime be applied prospectively, that is, for new projects only, with the option for existing producers to voluntarily opt into the system from their current royalty regimes.”
SACOME also called today for “at least some version of the industry’s much requested flow through share scheme” to be introduced so that at least unused tax deductions by miners could flow through to shareholders as an ‘exploration tax credit’.
“If the Federal Government is wanting to give the public greater participation in the country’s minerals industry, a flow through shares scheme is one way the Government could do this,” Kuchel said.
SACOME is currently undertaking an independent audit of all South Australian exploration and mining projects to determine the actual impact of the proposed RSPT and other reform measures.
Independent financial analysis of the potential impacts of the resources super tax in Queensland has thrown the future of new multi-billion dollar mining projects into grave doubt, Queensland Resources Council (QRC) Chief Executive Michael Roche said today. Commenting on the release in Canberra of an analysis of new project scenarios by tax specialists KPMG, Roche said the outlook for Queensland mineral industry investment was disastrous for copper, gold, nickel and highly damaging for thermal coal.
“The bottom line finding is that under the resource super tax, new copper, gold and nickel mines in Queensland simply don’t get off the ground while the net present value of new thermal coal projects is slashed by 57%,” Roche said. “This is not a theoretical forecast but the result of feeding real world financial and corporate data into the sort of financial model actually used by resource companies in making investment decisions. Based on what KPMG has concluded, new projects proposed for the North West Minerals Province and the Galilee Basin in particular are now in jeopardy as a result of the super tax.
“Xstrata Copper’s decision to suspend its north Queensland metals exploration program has been vindicated by the KPMG report, while the outlook for some A$20 billion worth of new coal mine investments in the Galilee Basin must also be under a cloud. Given the potential impact on new nickel mines, the report also raises questions over the ability of Townsville’s Yabulu refinery to move from a reliance on imported ores to local product,” he said
Roche said the report made international comparisons to show the degree to which Australian tax rates will be uncompetitive under the new super tax. It confirmed that Australia will have the highest effective tax rates of all comparable investment destinations benchmarked by KPMG.