Tuesday, May 18, 2010

Australian Government Proposes Major Tax Hike on the Resources Sector

The center-left Government of Australia has proposed a new tax scheme that involves ratcheting up the taxes paid by the natural resources sector. Among other things the tax scheme will require major resource extracting companies to pay a 40 percent tax on profits.

The government's rationale is that by taxing large operators it will be able to fund programs that assist smaller operators.

Needless to say, the major resource companies were not thrilled with the proposal. For example, Marius Kloppers, BHP Billiton CEO, said,
"The stability and competitiveness of the tax system have been central to the investment in resources in Australia. If implemented, these proposals seriously threaten Australia's competitiveness, jeopardise future investments and will adversely impact the future wealth and standard of living of all Australians."
The next step for the government is to consult with industry about the new proposal.

This is yet another example of how the natural resources industry faces an entire range of challenges, while at the same time looking ahead in a world that is likely to be resources constrained and thus willing to pay higher prices for commodities.

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