Experienced minerals industry professionals have questioned the assumptions that underpin the government’s mining super tax and cited examples of projects being put on hold or lost – even before the new tax comes into force.
The Australasian Institute of Mining & Metallurgy (The AusIMM) represents over 10,000 professionals across the minerals industry within Australia and overseas.
In its submission to the Federal Government’s Resource Tax Consultation Panel in Melbourne at the end of May 2010, The AusIMM referred to cases where projects are threatened and jobs in mining and the services sector will be lost.
Peter McCarthy, the Immediate Past President of the Institute explained that AusIMM members are employed across the minerals industry by different sized mining companies and exploration companies and major consulting and services groups with expertise in the sector.
Mr McCarthy said, “Our members have first-hand experience of the industry – what it takes to find and develop major ore bodies, to meet the challenges of a cyclical industry, and to live and work in communities that are dependent on that industry,”
“Already they are reporting that international exploration companies are pulling out of local projects because they see no future here, and that companies wanting to invest in the development of Australian resources are withdrawing in favour of overseas projects where they see a more stable political and investment climate.”
The submission by The AusIMM was particularly critical of the argument that mining should be subject to alternative taxation arrangements to other sectors due to its ‘immobility.’
“While for any given project the orebody itself is immobile, the exploration and extraction industry is highly mobile. In a highly consolidated, globally competitive industry, companies are constantly seeking out new orebodies with low political risk, which can be extracted at the optimal rate of return using existing technology.
“By ignoring this reality, the Government has created an unjustly discriminatory tax that will deprive all stakeholders in the minerals industry of the right to a reasonable return on effort, ingenuity and risk.”
Mr McCarthy explained that the government’s proposed Resource Super Profits Tax (RSPT) was creating uncertainty in financial markets, causing investors to reconsider their commitments to fund major projects.
“If Australia is to benefit from its mineral wealth into the future, it has to develop new projects. The uncertainty caused by the government’s arbitrary decision to impose a mining super tax without consultation has damaged the confidence of investors and hurt the job prospects of many Australians, not just now, but well into the next decade and beyond.
“This isn’t about windfall profits at the top of a mining super-cycle and it shouldn’t be about the estimated net worth of a few individuals – it’s about the many thousands of Australians who have invested their lives in creating economic wealth for this country, and the thousands more who live and work in the communities that support the mining industry.
“It’s those people who have a right to expect the government to consult them on any changes to the tax laws and to listen to them when they talk about the potential damage to their lives and their communities if a change to the tax regime is poorly designed and badly implemented.”