Holes in their feet

3 May 2010 By Martin Hutchinson

Australia’s proposed 40 pct resource super profits tax risks doesn’t just legitimize thirdworld profits grabs. By suppressing mining profits peaks, it could reduce goldrush exploration activity when prices are high. That, in turn, might exacerbate resource cycles.

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Australian Prime Minister Kevin Rudd on May 2 endorsed the recommendations of the country's tax commission for a 40 percent "resource super profits tax" to be applied on all mining company earnings in excess of the yield on longterm government bonds.

Legislation implementing the tax would be passed after next autumn's election, and the tax would come into effect in 2012. The proceeds would partly be used to offset statebased mining royalties, and would fund a modest reduction in corporate taxes. The tax is forecast to bring in about A$12 billion ($11 billion) in revenue in its first two years.

According to the tax commission, Australia has 95 percent of the world's reserves of tantalum; 40 percent of the world's uranium; 37 percent of its nickel; 26 percent of its lead; 24 percent of its brown coal; 18 percent of its zinc; 15 percent of its silver; 12 percent of its gold and 11 percent of its manganese.

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