fortescue sell down, page-13

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Miners warn resource tax will cost investment, jobsThe West Australian April 30, 2010, 12:29 pm



WA News / Ian Ferguson

A new, multi-billion-dollar Federal resources tax would stifle investment, threaten jobs and place companies at risk of falling into foreign ownership, miners said today.

WA mining industry chiefs warned that Australia would lose from Prime Minister Kevin Rudd's plan to tax miners in a bid to slow the WA economy to ensure a mining boom does not suck too much money and workers from the Eastern States.

BC Iron managing director Mike Young said the plan was a "double tax" with miners already paying taxes through a State-based royalty system.

Premier Colin Barnett has said WA would still require companies to pay state taxes.

Mr Young also said a Federal resources tax would create uncertainty, force companies to go offshore to raise cash and consider switching investments to countries that had more favourable tax regimes.

Murchison Metals executive chairman Paul Kopejtka said the tax would stifle investment in the developing Midwest iron ore region and put jobs at risk.

"I would urge the Federal Government to give this (resources tax) very careful consideration and consider the negative impacts," he said.

Fortescue Metals Group non-executive director Graeme Rowley said the tax could cost Australia a golden opportunity to capitalise on the growth of China and India.

"The winners from this tax will not be Australia but other countries like Brazil (another major iron ore producer)," he said.

"If we lose retained earnings, we lose the cash we need to expand, which will cost Australian jobs.

"Demand for iron ore will continue and if we can't create growth, we're in extreme danger of raids from foreign interests."

FMG chief executive Andrew Forrest said if Australia taxed those industries that helped drag it out of the global financial crisis, the country would become a one-speed economy, a slow-speed economy.

FMG economist Julian Tapp said money from WA flowed right through the economy and taxing high-growth States was a recipe for a zero-speed economy.

Yesterday, the Prime Minister indicated the Government planned to increase resources taxes to dampen the mining States' growth and ensure the two-speed economy "doesn't excessively impede other sectors" of the country.

"A growing resources sector will draw capital and workers to the mining States, increasing pressure on other industries and regions as they compete for employees and investment," Mr Rudd told a business breakfast in Sydney.

His comments come ahead of Sunday's release of the Henry tax review which is expected to back a national 40 per cent resource rent tax.

Treasury believes Australia has been short-changed up to $25 billion in recent years because the resources sector has not been taxed properly.

Sharemarket analysts have warned that WA mining company profits could fall by up to 56 per cent and valuations would be slashed by similar amounts if the Federal Government introduces a profit-based tax scheme.