Chief Executive of Rio Tinto’s Iron Ore Division Sam Walsh believes shareholders will vote with their feet and back off-shore mining projects in response to the Federal Government’s planned Resource Super Profits Tax.
“The Government has seen an opportunity to tax a highly productive and profitable sector of the economy”, he said.
The Federal Government expects that the super tax will reap $12 billion in the first four years after introduction that will be used to fund an increase in compulsory superannuation, cuts in company tax and an infrastructure fund.
However, Mr Walsh says this tax will have a detrimental effect on the millions of Australians who rely on mining shares for a comfortable retirement.
“The Government cannot increase taxes by such a large amount without impacting on share prices”, he said.
“Since the announcement of the tax, billions of dollars have been wiped of the value of mining shares”.
While no new Rio Tinto mining projects are at risk, Mr Walsh predicts many mining companies won’t be in such a strong position and shareholders have a right to be furious.
“There’s a lot of anger at the shareholder level because it’s those people who the government is directly short-changing”, he said.
There may be a flow-on effect as shareholders abandoning the domestic mining industry and move to invest in companies with large interests in off-shore projects.
“This tax is nonsensical, shareholders will vote with their feet and back companies that won’t be slugged with a 40% profits tax”, he said.
Mr Walsh maintains that if the Government wanted the mining industry to share a bigger tax burden they could simply increase current royalty rates.
“Whatever the increase, in must be, and be seen to be fair”, he said.
Useful links:
Commonwealth Government of Australia: http://www.futuretax.gov.au/pages/default.aspx
Minerals Council of Australia: http://www.keepminingstrong.com.au/
