IMF Deputy Supports Australian Mining Tax

June 24, 2010 Taxation in Australia

Heavy DutyPhilip Daniel, Deputy Head of the International Monetary Fund (IMF) tax policy devision, has revealed that he supports the Australian Government’s intention to instate a new 40 percent tax rate on mining industry profits.

On June 23rd Philip Daniel spoke at an Australian Institute of Chartered Accountants conference and gave his view on the country’s current dispute over the proposed Resource Super Profit Tax (RSPT). Phillip Donald said that he believed that a recent mining-sector sponsored media campaign had misinterpreted the possible effects of the RSPT, overemphasizing the potential costs and downplaying the benefits. He went on to say that he supports the RSPT “in principal.” Philip Daniel noted that he spoke on his own behalf and in no official IMF capacity, but indicated that the IMF generally agrees with his statement.

Under the Australian Government’s original RSPT proposal announced in early May, profits made by firms in the mining industry will be levied at 40 percent. According to Marius Kloppers, CEO of Australian mining firm BHP Billiton, the change would have increased the cumulative tax liability faced by mining firms from the current 43 percent to a level 57 percent. The RSPT proposal became an instant national and international controversy, and a media campaign by the was launched by the mining industry. The issue is exasperated by the international nature of many mining companies operating in Australia. Even Xi Jinping, the Vice-President of the People’s Republic of China, has conferenced with Australian Prime Minister Kevin Rudd on the issue. Australian Treasurer Wayne Swan has announced that he will not be attending the upcoming G20 Summit in Toronto, in order to continue negotiations with mining industry leaders to resolve the tax issue.

Phillip Donald stated that despite the industry’s claims, the RSPT will be less damaging to industry investment then the current tax treatment of mining profits. Additionally, he refuted that the tax would hamper industry growth or increase Australia’s sovereign risk. Further, he added that the Government has currently gone far and beyond what was recommended to it in accommodating for the concerns of the mining industry.

Photo by Compound Eye