**[investwise]** Australia:Resource Rich Nations Find Taxing Minerals A New Source Of Wealth

 

Australia Shows The Way To Naxals-Higher Taxes To Bring Prosperity To The Mineral Producing States, Move Might Scuttle Asian Growth For nearly 2 decades the India,China boom has been led by mineral imports from China, Brazil and Indonesia. Suddenly every rule in the book is getting changed.   Australia would heavily tax the booming profits of its mining companies under a tax system overhaul proposed Sunday that also would invest in infrastructure to support mining operations and reduce corporate taxes. The new 40 percent tax on resource profits targets industries that have grown rapidly as they've produced the raw materials that feed burgeoning Chinese and Indian manufacturing demand.   Mining royalties currently paid to Australian state governments do not reflect rising commodity prices. The government says mining profits rose by 80 billion Australian dollars ($74 billion) in the past decade, yet government revenues from resources increased by only AU$9 billion.   Andrew Forrest, chief executive of Fortescue Metals Group Ltd., last week warned that higher taxes on mining could "kill the golden goose" that had kept Australia out of recession during the global economic downturn. Mine companies also say higher taxes would stifle investment in the resource sector and cost jobs.   The tax overhaul Prime Minister Kevin Rudd proposes requires Parliament's endorsement to become law. It would introduce the so-called Resource Super Profits Tax in July 2012. The company tax rate would be cut from 30 percent to 29 percent in July 2013 and to 28 percent a year later.   The government forecasts that the cut in company tax combined with the mining tax will increase Australia's gross domestic product by 0.7 percent a year.   "These changes will not be welcomed by every business or every interest group, but they are the considered, responsible changes we need if we are to turn our success during the global recession into enduring gains for our economy, our people and our nation," Rudd said in a statement.   Treasurer Wayne Swan told reporters he could not say whether tax legislation would be introduced to Parliament before national elections are held at a date to be set late this year.   Under the tax overhaul, resource-rich states would continue to reap mining royalties, but the federal government would refund those costs to mining companies before calculating their federal tax debt.   The tax would be levied on profits after all the costs of mining operations, capital investment and dividends to shareholders are deducted.   Marginally viable mine companies would potentially be better off in cases where the costs of extracting minerals barely cover royalty charges because of a price downturn or when the ore deposit is almost exhausted.   About AU$5.6 billion of the mining tax revenue would be spent over a decade on public infrastructure critical to the industry such as ports, rail and roads.   The government argues the tax shift would prevent a "two-speed economy" emerging in Australia where non-resource industries such as manufacturing, construction and tourism cannot attract investment or staff because they cannot afford to match the lucrative wages offered by the mining industry.   Also as part of the tax overhaul, the government would increase the proportion of salaries that Australian workers must save for their retirements from the current rate of 9 percent to 12 percent by 2020.   Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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