Seems like Australia’s idea of a ‘super profits’ tax on mining companies is gaining traction in other countries.
This is the tax that could knock over 30% off of the valuations of Australian mining companies.
Now other resource-rich nations are considering adding additional taxes of their own.
“It could create what the miners are now describing at a global level as a type of tax contagion,” said Tom Price, commodities analyst with UBS AG in Sydney, in an interview. “They might levy a new tax at the miners in Brazil. Canada is another mineral province and South Africa.”
Chile, the biggest copper exporter, is proposing a temporary rise in mining taxes to help pay for earthquake reconstruction that may cost BHP, Xstrata and Anglo American Plc $1.2 billion in the next two years. Brazil, the second-biggest iron ore exporter, may tax shipments of the commodity or raise royalties, Energy and Mining Minister Edison Lobao has said.
Additional taxes reduce returns on investment, which makes less potential projects pass return on capital hurdles within mining companies. Should ‘tax contagion’ run rampant, it cut back future expansion. This would be supportive of prices in the longer-term, but something tells us that if nations around the globe start attacking mining companies for excessive profits, then we’re probably at a peak in the current commodities cycle.