Recent statements by Prime Minister Kevin Rudd's government to impose a super tax of 40% on profits of mining projects in Australia from July 2012, have created much consternation among mining executives and investors in Australian mining companies. This tax has come to be known officially as the 'Resources Super Profits Tax'. It is not yet clear how profits are to be calculated in reporting to the fiscal authorities in relation to this tax, but it is anticipated that the royalty tax scheme currently in existence and pegged at 17% would be replaced by a tax on a producing mine's profits. The tax would kick in on profits above the yield rate of Australian Government Bonds, currently at 6%, although the government is considering softening its stance to profits above 12%. Support for this tax revolves around the idea that natural resources are the common assets of the public domain and that mining companies are extracting minerals and profiting disproportionately from their activities to the detriment of their true custodians. During 2008, metals prices rose feverishly which added to mining companies' bottom lines; however, it has also been suggested that the mining industry was at the forefront of saving the Australian economy and diverting it away from recession.

An analysis of the proposed tax shows that it would amount to a new tax imposed over and above the state and federal taxes and royalties already levied on mining companies, and may therefore have the effect of driving investments away from the mining sector in Australia to lower taxed jurisdictions, such as Canada. It would also have the effect of lessening the incentive to develop greenfields projects by increasing the cost of risk. Further to this, Australia is currently evaluating the implementation of a resource exploration rebate (RER). Similar to the Canadian flow-through regime, the RER would likely not be enough to offset the increased super tax on profits. South Australia would bear the brunt of this new tax with an estimated A$40 billion in scheduled investments to be pulled as a result of it. However, according to the government, capital spending plans by mining firms were expected to be 5.5 percent lower for 2010 and 2011 than an estimate made three months ago. Therefore, it is important to note the threats to cut mining investment by mining companies may not be solely attributed to this tax but also to a possible slowdown in capital spending as a result of economic conditions.

Australia is not the only jurisdiction seeking to escalate taxes on mining companies. In February 2010, the government of Brazil, most likely in an effort to encourage domestic production to remain in the country, was considering the imposition of taxes on shipments of commodities and an increase in royalty payments. China has explored taxing miners based on metal prices of reserves and resources, as opposed to on the amount of actual resources extracted. Officials at India's Ministry of Mines have also announced that they are looking to impose a similar tax on miners based on the Australian model. Undoubtedly, as the debate surrounding the Resources Super Profits Tax unfolds, other countries are sure to look to its outcome when considering amendments to their own tax regimes.

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