Ross Garnaut, Australia’s adviser on climate change, called for changes to the planned 40 percent profit tax on resource to maintain the industry’s growth.
Garnaut, who designed the government’s emissions trading plan, said the tax should become “neutral,” guaranteeing stability for investors and companies affected such as and Rio Tinto Group. It should allow for offsetting exploration losses and changes need to be made in how it is applied to development and production, he said.
“The new arrangements would have good prospects for future stability,” Garnaut said in a speech in Melbourne last night. “They would be consistent with healthy growth in the resources industry in the period of great opportunity that lies ahead.”
The proposed resource levy, included in the government’s response to Treasury Secretary Ken Henry’s taxation review, is scheduled to start in 2012 and may reap A$12 billion ($9.8 billion) in its first two years. Prime Minister Kevin Rudd has clashed with mining companies that help make up 9 percent of the Australian economy.
Treasurer Wayne Swan, who has accused miners of waging a fear campaign against the tax, will meet with Queensland state Premier Anna Bligh today. BHP met with Treasury officials in Canberra today after Rio Managing Director for Australia David Peever’s met with the officials yesterday.
“BHP Billiton conveyed to the panel that the proposed super tax has been designed in a way that has the unintended effect of dramatically slowing investment in Australia and putting the future prosperity and employment prospects of all Australians at risk,” BHP said in a statement after the meeting.
“The resources industries are responding to the Henry review and the government’s proposal with concerted pressure and noise, but not yet with analytical statements” said Garnaut, who is also chairman of Lihir Gold Ltd, the second-largest gold mining company on the Australian stock exchange. “We cannot continue the debate with slogans.”
Peever yesterday said the Treasury consultation was too narrow and that Rio will review “all of our investment decisions” while it analyzes the taxation. Peever met the Treasury consultation panel for two-and-a-half hours.
The tax may reduce earnings at Melbourne-based BHP by 17 percent and Rio by 21 percent in 2013, UBS AG said in a May 3 report. BHP’s net income in the year ended June 30 was $5.9 billion while Rio earned $4.9 billion in 2009.
Australia is the world’s biggest exporter of iron ore, coal and alumina, and demand for resources from China and India helped the country’s A$1.2 trillion economy skirt recession during the global financial crisis.
“This is a dangerous time for a country in a dangerous world,” said Garnaut. “Australia for the moment is faring better in the aftermath of the great crash of 2008 than other rich countries.”