Rudd Government under-estimates fallout says AMEC...

Rudd Government under-estimates fallout says AMEC chief

Association of Mining & Exploration Companies (AMEC) CEO, Simon Bennison, shared breakfast with the Prime Minister, Kevin Rudd and the Federal Minister for Resources, Martin Ferguson over the proposed tax on mining profits.

Here are some of the main points:

The government is "claiming this is similar to the Petroleum Resource Rent Tax - this is not the case as the PRRT is significantly more generous - it has a much higher allowance for capital expenditure before profits are taxed, and it allows an immediate write-off of capital expenditure."

"Initial indications from the accounting sector is that the effective tax rate for many mining companies will increase to approximately 56% (only taking into account Company Tax, royalties and the new mining tax C disregarding payroll tax, stamp duty and other State/Territory based taxes, numerous fees and cost recovery levies)."

Bennison said he hoped as a result of the meeting that the Prime Minister and Minister Ferguson both have a better understanding of the industrys business fundamentals, decision making processes, and the severe and wide consequences of any new mining tax.

However, "there does not appear to be any sympathy for the possible plight of the hundreds of smaller mining and mineral exploration companies throughout Australia."

Australian mining company members of AMEC "have been receiving calls from nervous domestic and international investors with the result that discussions and potential financing arrangements have been deferred or cancelled."

Unfortunately, as forecast by AMEC, this has also resulted in share prices and the stock market being severely affected, as has every superannuation fund investing in Australian resource stocks."

"Lets be clear- this is a mining tax. This is not a "super profits" tax - there is only an allowance of 6% on miner's capital expenditure before the tax kicks in."

Bennision said he had heard of several new and planned expansion projects being put on hold.

He said we believe that the fallout and consequences of the Governments announcement on Sunday regarding the proposed new mining tax has been completely under-estimated by the Government and its advisers - who only consider it to be a blip on the radar.