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  • BHP Billiton chairman Jac Nasser slams Australian mining ‘super-tax’ 1 comment
    Jun 11, 2010 5:48 AM | about stocks: BHP, BBL, RIO, XSRAY, AAUKY

    In a letter to its shareholders, BHP Billiton (LON:BLT, ASX:BHP) called for Australia’s proposed super-tax to be abandoned, due to the proposal’s "fundamental failings". According to BHP chairman Jac Nasser, the current proposal requires a substantive re-design and, like with Australia’s previous major tax reforms, the Australian government should consult the mining industry "to find a solution in Australia's best interests".

    “For reasons we do not understand the government chose not to undertake consultation on the nature and design of the proposed super tax prior to its announcement”, Nasser stated. According to BHP, Australian governments have traditionally engaged with industry on major taxation reform, notably with the Petroleum Resource Rent Tax Act 1987 (OTCPK:PRRT).

    The company highlighted that in 1984, when the PRRT was initially proposed, three public papers were released and open for discussion for six months, and subsequently the tax was enacted over a three year period. According to BHP, the genuine consultation allowed the government to make the significant changes necessary for the tax to be workable and achieve its tax reform objectives.

    BHP noted its disappointment that such a consultation has not been possible in relation to the ‘super-tax’. “Therefore the government missed the opportunity to have Treasury's theory tested by practical experience and industry knowledge”, Nasser stated.

    “We always welcome the opportunity to consult but unfortunately ... there has been no acknowledgement by the government of the major flaws of the proposed tax and the significant impact on the industry”. BHP said it is not against tax reform, but it believes that the principles of sound tax reform are not present in the current proposal.

    “The 40 per cent super tax rate, in addition to company tax, will make the Australian mineral resources industry the highest taxed in the world and uncompetitive with other resource-rich nations. An uncompetitive tax rate is a fundamental problem.”

    “The super tax will apply to existing projects, fundamentally changing the rules when billions of dollars have already been invested.”

    According to BHP, any new tax on the minerals resources industry should: Not fundamentally change the rules of the game on existing projects; Ensure that overall tax is competitive with other mineral resources countries; Vary between the kind of mineral resources mined; Be applied on the value of minerals alone.

    Otherwise, the company believes that the proposal could damage Australia's reputation as a stable and fair place for investment, the country could lose investment to countries with more attractive tax rates, and it could unintentionally penalise investments in infrastructure, processing or other support activities.

    “The Australian government needs to understand the real world impact of the proposed super tax or it will hurt the Australian minerals industry and hurt Australia's future,” Nasser said.

    BHP also told its shareholders that it wanted to set the record straight, in terms of its own tax payments in Australia. “The government has not accurately represented the level of taxes we pay on our Australian operations ... It concerns BHP Billiton that inappropriate conclusions appear to have been drawn ... Total taxes paid by BHP Billiton's Australian operations in relation to the financial years 2004 to 2009 inclusive exceed A$24 billion."

    “The 2009 earnings of BHP Billiton's Australian operations were almost fully reinvested back in Australia,” he added.

    Disclosure: no positions

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  • Paul Hanly
    , contributor
    Comments (840) | Send Message
    It brings to mind that classic response, " he would say that, wouldn't he."


    The super profits tax may result in the minerals not already being mined staying in the ground.


    This is a form of forced national saving.


    Over time it is likely also a good investment based on the long term trends of commodity prices.


    It will also provide greater intergenerational equity.


    As exports of minerals will be lower than otherwise, the currency should fall, making other Australian industry more competitive internationally and rebalancing the economy more towards local production, increasing jobs in import replacement industries.


    It would result in some additional inflation in that imported goods, including oil, would become more expensive, providing impetus to improved energy efficiency and reduced emissions.


    Under the current situation state governments with large mineral resources have done resource sale agreements (from the public/government to the mining companies in exchange for royalties) without capturing a reasonable share of the upside in mineral prices.


    These same states gain subsidies from NSW and Victoria whose manufacturing industries have been dramatically reduced through tariff reduction and the high currency resulting from large mineral exports which renders them internationally un-competitive.


    The high AUD also reduces our attractiveness to international tourists. Tourism is also one of our largest earners of foreign currency. Increased mining exports raise the currency and reduce tourism, a very high employment industry.


    It isn't as simple as the mining companies would have you believe.


    Also I suspect that BHP has included its royalty payments in "taxes" but I am open to correction on this. If I am correct, they are treating royalty payments as tax, not as he purchase price of the minerals in situ, deferred until extraction.
    11 Jun 2010, 09:37 AM Reply Like
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