Rio Tinto Group chief executive officer Tom Albanese says Australia’s plan to boost taxes on resources producers would make the government a “silent partner” in businesses such as itself.
The proposal for a 40 percent Resource Super Profits Tax (RSPT) on resource companies has also damaged Australia’s reputation overseas and added to sovereign risk, Albanese said in an interview broadcast yesterday on ABC’s Inside Business.
“This is half our balance sheet at risk because we have someone now coming in to say: ‘I want to be your silent partner: I want 40 percent of your pretax profits and largely written-off assets,’” Albanese told the program.
PHOTO: AFP
He said the related cost was difficult to assess because of the complexity of the tax, and may amount to “well over 50 percent.”
The government set aside A$38.5 million (US$32.6 million) in its May 11 budget to promote an overhaul of the nation’s tax system, including the resources levy. Mining companies oppose the tax, scheduled to take effect in 2012, placing full-page advertisements in Australian newspapers to lobby for changes.
‘MISINFORMATION’
Last week, the government said it would run its own advertising campaign to counter the “misinformation.”
Australian Treasurer Wayne Swan said in an e-mailed statement yesterday that the super profits tax wouldn’t be retroactive.
“There has been much comment from mining companies in recent weeks about the supposed ‘retrospectivity’ of the RSPT,” Swan said. “These claims are clearly misleading, as the RSPT will apply to mining profits from 1 July 2012. It does not apply to past profits.”
Rio’s CEO said it was important to reconsider the proposal and he’s ready to work with Australian Prime Minister Kevin Rudd’s government on a fundamentally different approach. The world’s third-largest mining company is already paying almost 35 percent tax plus royalties, and will publish independently audited data on its tax payments later in the week, he said.
The government “won’t back away” from the core elements of its proposal, Australian Finance Minister Lindsay Tanner told Channel Ten’s Meet the Press program yesterday.
Still, Swan told parliament last week that the government was continuing to consult with industry as criticism of his administration’s proposed advertising campaign mounted.
Australian Shadow Minister for Employment and Workplace Relations Eric Abetz yesterday called for a senate inquiry into the government’s handling of its advertising campaign.
“Labor is breaking its own guidelines in order to run a partisan political campaign,” he said in a media release. “This has all the stench of a desperate government facilitating false excuses to run a political campaign at taxpayers’ expense.”
The government’s use of taxpayer money to get its message across is “a scandalous situation,” billionaire businessman Clive Palmer said on Meet the Press yesterday.
The super-tax proposal itself is also hurting overseas investment and is likely to damage Australian jobs and livelihoods, he said.
Rudd told journalists in Melbourne on Saturday that the campaign is in the national interest, while Tanner said Australia’s economy could be harmed if misinformation about the tax went unanswered.
Wal King, the head of Leighton Holdings Ltd, Australia’s biggest construction company, said builders are also worried about the tax, the Weekend Australian reported on Saturday.
He made the comments in a statement as president of the Australian Constructors Association, the newspaper said.
WORST-CASE ASSUMPTION
The mining tax plan has prompted Rio Tinto to re-evaluate all its projects in Australia, Albanese said in the ABC interview.
“I have said to each of my managers, including during discussions this week while I’ve been in Australia, that every single project in Australia needs to be tested and retested and recalibrated, basically remodeled, on a worst-case tax assumption,” he said.
The Minerals Council of Australia ran an advertisement on YouTube and began a radio campaign on May 24 against the tax, saying Australian miners will pay a levy of 58 percent, “by far the world’s highest tax on mining.” It compares with the 23 percent paid in Canada, 30 percent in Russia and 33 percent in South Africa, the council said.
Rudd’s government and resources companies are also clashing over the definition of a “super” profit, which the proposed tax sets at returns above the long-term Australian government bond rate of about 6 percent.
Rudd’s Labor party and the Liberal-National opposition coalition led by Tony Abbott are tied in the polls, according to a Newspoll survey of 1,159 people taken between May 14 and 16 and published in the Australian newspaper on May 17.
Voter dissatisfaction with Rudd rose to 51 percent, from 40 percent in February, in the lead up to a national ballot that must be called by April. Rudd would lose an election called now, according to a Herald/Nielsen poll published on May 10.
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