Australia’s planned mining tax will raise less than half the amount forecast by the Australian Department of the Treasury over the next two years amid reduced profit estimates for BHP Billiton Ltd and Rio Tinto Ltd, UBS AG said.
Mining companies, including BHP, Rio and Fortescue Metals Group Ltd, will pay A$1.8 billion (US$1.8 billion) in the next fiscal year and A$1.4 billion in 2014, compared with government forecasts for revenue of A$6.5 billion in both years, Glyn Lawcock, a Sydney-based analyst at UBS, wrote in a report on Friday.
The bank cut its estimates for profits at both BHP and Rio by 4 percent for next year, citing the impact of the mining and carbon taxes, which take effect on Sunday.
The mining levy “is designed to be a volatile stream of tax revenue for the Australian government, but funding a stable and growing series of government obligations,” Lawcock wrote.
“As a result of this mismatch of a declining revenue position on our commodity price forecasts and rising obligations, we believe a future Labor government may seek to either raise the tax rates or bring in other commodities,” he added.
The government, seeking to return the nation’s budget to a surplus in the year ending June 30 next year, has said A$1.8 billion in revenue from the mining tax will be diverted to increases in family payments.
Australia’s price on carbon emissions, set at A$23 a tonne, is expected to raise A$24.7 billion in four years. The nation will transition to an emissions trading system in 2015 that lets the market determine the cost.
BHP would pay A$715 million in mining tax and about A$300 million in carbon tax in the year ending June 30 next year, Lawcock said. The mining tax wouldcost Rio A$676 million, and the carbon tax A$202 million over the next calendar year, he said.
The most emissions--intensive businesses, including those belonging to BHP, Rio and Alumina Ltd, as well as liquefied natural gas projects would be eligible for carbon tax assistance from the government, Lawcock said.
While this will help Alcoa Worldwide Alumina reduce its carbon tax liability to about A$20 million from A$380 million before the assistance, Lawcock still cut Alumina’s earnings estimate for next year by 5 percent to A$130 million.
Alumina owns 40 percent of Alcoa Worldwide Alumina.
The bank also cut Whitehaven Coal Ltd’s expected earnings for next year by 8 percent, Mount Gibson Iron Ltd by 6 percent and BC Iron Ltd by 5 percent.
The government expects to raise A$3.2 billion from the mining tax in fiscal 2015 and A$3.7 billion in 2016, compared with UBS’s forecasts of A$1.1 billion in the year ending June 30, 2015 and A$538 million in 2016.