Mining stocks “fell down a shaft” this week, said Andrew Hill in the FT. Following a review of the tax system, Australia’s centre-left government plans a “Resource Super Profits Tax” (RSPT) of 40% on mining sector earnings. The government says that the tax, to be introduced in 2012, should raise an additional A$11bn for the Treasury over two years. Shares in BHP Billiton and Rio Tinto slumped by 8% and 6.5% respectively on Tuesday alone. A$27bn (£16.2bn) has been wiped off the value of Australian-listed mining stocks.
What the commentators said
The move – branded a “mini-Chavez” by GaveKal Dragonomics – would be a hefty blow to miners’ profits. Throw in corporate taxes and the total tax burden on the resources sector would rise to 58% – the highest in the world. Glyn Lawcock of UBS reckons that the RSPT would knock 21% off Rio Tinto’s 2013 earnings and 17% off BHP’s.
British politicians must envy the Australians, said David Prosser in The Independent. Here, any hint of a bank windfall tax triggers threats to move to Switzerland. The likes of Rio and BHP “can make no such threats”. They must base themselves “where the world’s minerals are to be found”.
Miners shouldn’t panic just yet, however. The plan may die a death if there is a change of government in Australia in an election later this year. Evenaa if it doesn’t, Michael Rawlinson of Liverium Capital thinks it’s unlikely “to be adopted in its current form”. The real threat for the industry would be governments in other countries jumping on the bandwagon. As Paul Galloway of Bernstein Research warned, sector profits are high, and budget deficits are large. So this “tax-grab” could well become a “global trend”.