Tom Albanese, Rio Tinto’s chief executive, raised the temperature in the mining industry’s campaign to kill off Canberra’s proposed 40 per cent tax on resource company profits when he described Australia as his “number one” sovereign risk globally.
As he arrived in the country on Monday ahead of the Anglo-Australian group’s annual shareholders meeting in Melbourne he said: “This is affecting our Australian businesses and investment decisions as we speak”.
He said all Rio’s projects in Australia were being reviewed based on a worst-case scenario although he declined to comment on specific investments at risk.
Mr Albanese’s comments are the latest in a three-week tirade by miners since Canberra announced plans for its so-called resources super profits tax. The tax is scheduled to begin from July 2012 and apply to new and existing projects.
Figures from Australia’s political and corporate worlds have been scrambling to ram home conflicting messages in an increasingly high pitched debate, at the heart of which is the question of how the wealth of Australia’s non-renewable resources are shared.
Many in the mining industry readily concede they should pay higher taxes but it will be difficult to find common ground with the government as both sides focus on the rhetoric.
Canberra has said it will consult the industry on implementation and refinements, but it has made it clear it wants the tax implemented pretty much as first announced.
Canberra’s firm stance has sparked uproar. Mining groups are seeking to galvanise support from shareholders, employees, pensioners and stock market investors.
BHP last week said it would hold discussions with its shareholders, which number more than 500,000 in Australia, while Rio e-mailed its employees, urging them to contact their local members of parliament, newspapers and radio stations.
The Minerals Council of Australia, the leading industry body, has launched a protest websiteand its first YouTube advertisement saying Australia’s tax will be more than twice as high as Canada’s and that “millions” of Australians’ pension funds are at risk.
Some in the industry claim the tax has pushed the Australian dollar down by more than 12 per cent to a 10-month low compared to its US counterpart. But most analysts says the Australian dollar’s fall is the result of Europe’s debt concerns and falling global commodity prices, although the planned tax may have helped magnify the decline.
In response to the mining industry’s advertisements, Wayne Swan, Australia’s treasurer, said on Monday that he always knew the miners would fight in an “hysterical and in an inaccurate way”.
Battles between Canberra and the miner are not new. Mining groups waged a campaign in 1993 over “native title” laws that granted indigenous communities claims to Australian land.
Five years before that, mining and energy groups unsuccessfully lobbied against the introduction of a 40 per cent tax on profits generated by offshore petroleum projects.
But neither native title nor the petroleum tax has derailed Australia’s mining and energy sectors, which are now investing large sums of money in Western Australia and Queensland, the country’s two resource rich states.
The threat from the mining lobby this time is that there will be a capital strike as miners abandon new projects and redeploy their capital to countries with lower taxes.
Andrew Forrest, chief executive of iron ore Fortescue Metals, warned last week that two medium-term projects slated for development at some point were under review.
He added that the new proposals would make it difficult to finance projects and that China would use its financial muscle to replace Australian miners if the tax was introduced.
Mr Forrest, one of Australia’s richest men, was also one of the earliest mining executives to come out against the tax together with Marius Kloppers, chief executive of BHP.
But the centre-left Labor government has also won support. Not surprisingly it has won backing from the Australian Workers Union, which has launched its own media campaign against the mining industry’s so-called fat cats, targeting Clive Palmer, an Australian mining boss, as well as Mr Albanese and Mr Kloppers.
Senior industry figures, including Ross Garnaut, chairman of Lihir Gold and an economist who helped design the petroleum rent tax, and Roger Corbett, a member of the Reserve Bank of Australia board, have also expressed support for the new tax.
At the weekend, Angel Gurria, head of the Organisation for Co-operation and Development, said the tax was justified and was unlikely to hit long-term investment in Australian resources.
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