Executives from Australia ’s most prominent mining companies have warned that the Rudd Government’s proposed resources super profits tax had prompted financial advisers and others to promote mining projects overseas, rather than in Australia, and that more large projects in Australia are getting deferred, such as Fortescue Metals Group’s Solomon and Western hub projects.
Gina Rinehart, chairwoman of Hancock Prospecting, has claimed that “loss of investment in Australia’s resources industry will hurt Australia’s interests for decades”.
Mrs Rinehart also said mega-projects that required major infrastructure would be hit more severely by the tax than smaller ones involving only mine capital because of the new tax’s proposed treatment of capital deductions at the mine gate.
Mrs Rinehart has queried the rationale behind this when Australia needs more infrastructure to be developed.
She further queried the rationale for the new tax when Australian Tax Office statistics, as reported recently, show that profitability across the mining sector was lower than for various other industries, including health care, real estate and agriculture. “Are Australians really better off when taxation increased,” she asked.
Mrs Rinehart, whose company Hancock Prospecting is trying to develop a $6 billion-plus iron ore mine and infrastructure project in the Pilbara, together with other projects in Queensland, has joined the united chorus of mining and oil and gas industry leaders who strongly oppose the proposed tax.
They claim it will have a severe impact on WA’s biggest and most important industry and affect all related industries and all those who have invested as shareholders in mining and
related industries.
Mrs Rinehart says: “It is wrong for any politician to think that the RSPT will only affect the mining industry and its related industries, as the effect spreads to all those Australians holding superannuation policies, all shareholders in mining and related companies, all farmers and pastoralists requiring fertiliser and cement and will damage Australia’s consumer industries — be they selling cars, boats, fashion, meals at restaurants, etc.”
The opposition to the tax focuses on claims the RSPT would force companies to axe billions of dollars in proposed resources project investments in Australia and instead pursue developments in more tax-friendly regions offshore.
Tony Sage, chairman of Cape Lambert Iron Ore, told The West Australian that backlash to the tax had already come from China— an important source of capital for WA miners — and very important market. This was confirmed by Barbara Grieve, chief executive of AXCEN Australia and China Business.
“Australia does not have a monopoly on minerals and must compete for funds to develop its mineral projects,” Mrs Rinehart and Mark Creasy said. Mr Creasy is one of WA’s leading
prospectors, but even he has had to change his priorities given the threat of the RSPT, and is looking for overseas opportunities.
Ron Manners, Mankall Economic Education Foundation chairman said: “Financing competing overseas projects which will then compete against Australia’s projects is detrimental to our growth and interests over the mid and long term.”
Greg Poland, managing director of the Strzelecki group of companies said: “It should be recognised that the RSPT as currently defined is not only bad for Australia, but also there are
problems with it as it is not yet clearly defined.”
And Greg Anderson, managing director, Minetec Communications said: “The mining industry was very concerned that projects which needed to attract and borrow more money for large infrastructure requirements such as roads, rail, port and town and facilities at port, airfields, power, water, accommodation and other facilities for employees and consultants, would be more greatly disadvantaged by the RSPT than smaller mine gate projects.”
Michael Kiernan, managing director of Stirling Resources and executive chairman of Swan Gold Mining, said: “The expense of providing all that infrastructure is currently not scheduled for deduction prior to the super tax hence there is a considerable further disadvantage for projects that bring new infrastructure to Australia (in general roughly a mine is less than one third of an entire mining project when it needs to construct roads, airfields, rail, port and town and other infrastructure facilities).”
Hans Mende, chairman of AMCI which has extensive interests in both coal and iron ore in Australia, said: “Rushing of funds overseas to start or increase competing projects overseas would be against Australia’s interests, revenue and jobs for decades, not for a short period.” The argument that raising taxes on the mining industry will lead the industry to greater growth, has been ridiculed by the mining industry. Mrs Rinehart said she felt she and other friends of hers in the industry “felt especially saddened by the impact the RSPT would have on those no longer in the workforce dependent on limited pensions and their superannuation, when the super industry had invested greatly in the mining and related industries, thus directly effecting all people reliant on superannuation”
Peter Fitzpatrick, managing director of the Crusader Management Group, said the RPST would become an election issue “if this super tax is not dropped or vastly amended as the effect on Australians is much greater than just the mining industry and the industries or companies that depend upon the mining industry”.
“If Prime Minister Kevin Rudd and the ALP think their Henry super tax plan will not damage Australia’s future and they proceed with it, they should not risk all Australia on such an extensive gamble,” Mrs Rinehart said.
Imants Kins, executive chairman of E Com Multi, said: “If they decide to proceed with this, (RSPT), it would make better sense to just test it on part of Australia, say near the major cities in southern Australia that already have the advantages of city amenities, better infrastructure and leave northern Australia, across the north of Western Australia, all Northern Territory and north Queensland, free of this new tax and create a northern economic zone free of new taxes, allowing and stimulating our north to welcome investment to drive Australia’s economy and future development.”
This would be much better than just selecting existing projects to rescue from this tax or special tax privileges to a few projects for political reasons.”
Mrs Rinehart said: “This northern economic zone should also allow lower personal taxes or personal tax rebates for all who live and work in the northern zone for more than a year, whilst they continue to live and work anywhere in the northern zone.”
Johnston Enterprises Australia chief executive Norm Johnston, a world specialist in economic zones, has encouraged the Federal Government to provide strong consideration of this new concept. Mrs Rinehart added: “Innovative thinking and action is required because Australia is facing both the loss of its freight advantage to Asian markets due to 400,000 DWT (deadweight tonnage) ships now being produced to lessen freight costs, and, Australia faces increased competition from very low-cost countries with massive ore reserves, so Australia must act to retain its competitiveness.”
Australians for Northern Economic Development and Economic Vision (ANDEV) include businessmen Greg Anderson, Mark Creasy, Barry Humfrey, Michael Kiernan, Ian Kent, Ron Manners, David McSweeney, Hans Mende, Hugh Morgan, Greg Poland and Tony Sage.