Somehow in this absurdly globalized world, a potential windfall profits tax on Australian miners has become a huge issue that arguably affects stock prices in the US. That’s weird.Earlier in the American trading day, there were murmurs that perhaps the tax would be shelved.
Well… not yet.
The latest from the Sydney Morning Herald indicates that Australian Treasury Secretary Ken Henry is still pushing the tax hard, arguing before the Australian Senate that the supertwas was reasonable, and that it wouldn’t cause harm to the economy.
Dr Henry told the hearing while the issues surrounding the tax were ”difficult” and may have prompted a ”rethinking (of) the timing”, he predicted investment in mining in Australia would hold up.
”Today, we remain very confident of our forecasts for mining investment in the budget,” he said.
Modelling, he says, showed mining would continue to be profitable under the resources super profits tax (RSPT), noting the abolition of the existing royalties system.
And while mining executives have warned the RSPT would increase sovereign risk, Dr Henry disagreed.
”I don’t understand why there should be any perceived increase in sovereign risk at all but even if there were it could only be a small fraction of that … that quite considerable reduction in project risk due to government’s commitment to underwrite 40 per cent of expenditure,” he said.
And though the tax is often identified as being 40%, that’s actually not quite right. Says Henry, a miner could pay up to 56.8% in periods when they experience windfall profits.