Australia Capitulates, Backs Down On Resource Super-Profits Tax
Once again massive corporate behemoths show those bankrupt sovereigns who is in charge. Case in point China's great resource subsidiary-cum-housing bubble known as Australia. The Australian reports that a mere three weeks after the Rudd unveiled its new resource super tax, the government will back track on this proposal, and will "lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies." Not to look completely toothless, the government will still keep some vestige of the tax, although now that corporations know they have the upper hand, look for this tax proposal to be soon eliminated completely. In fact, mining companies have already declared the changes do nothing to stop the risk to investment in Australia. Quite possibly one of the main reasons for this capitulation has been the huge drop in the AUD over the past several weeks, as investors have unwound long AUD trades with gusto.
More from the Australian:
THE Rudd government is moving towards a major backdown on its $12 billion tax on resources, redefining its proposed super-profits levy, but the big mining companies have declared the changes do not stop the risk to investment in Australia.
Only three weeks after unveiling the new resource super-profits tax, the government is preparing to lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies.
To offset the lost revenue in raising the threshold to the same level as the existing petroleum resources rent tax, which applies to offshore gasfields, the government intends to withdraw the 40 per cent taxpayer-funded compensation originally offered for mining projects that fail.
But all the major mining companies have rejected the new proposals as "tinkering at the edges" and not addressing the main risk to mining investment in Australia. The mining companies are demanding more negotiation with the government on the issues of the retrospective application of the new tax, different rates for different minerals and the 40 per cent tax rate.
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BHP Billiton chief executive Marius Kloppers declared last night that any thought the petroleum tax would work for minerals was "naive" and demonstrated "a lack of knowledge as to how investments are made".
"Most importantly, we must understand that for each mineral we are competing against other investment destinations, and each set of minerals has a different set of competitors and those competitors set the price," Mr Kloppers told The Australian.
And Xstrata chief executive Mick Davis said from South Africa: "The government needs to do what it should have done all along and enter into full and open consultations with the industry where every aspect of the super tax is open for debate. Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia.
"The government should stop negotiating with itself and start consulting with the industry."
Rio Tinto chairman Jan du Plessis told the company's shareholders that Australia's reputation had already been damaged by the super-profits tax proposal.
"We are concerned that the proposed resources super tax will erode Australia's competitiveness, severely curtail investment and limit jobs growth," Mr du Plessis said yesterday. He said that some of the government's arguments for the tax and some of the statistics that had been produced to support them "could only be described as scandalous, totally scandalous".
In the meantime, the slow, concerted creep by corporations to take over the world continues. Next step: the IBM Stellar Sphere, the Microsoft Galaxy, Planet Starbucks.