Australia will impose a 40 percent tax on resource profits from 2012 and raise A$12 billion ($11.1 billion) in its first two years. Prime Minister Kevin Rudd, preparing for an election within a year, said the changes will help the government pay for additional hospitals, retirement benefits and company tax reductions.
Prime Minister Kevin Rudd, in a pitch likely to strike a chord with voters, said Australians had been shortchanged during a 10-year resources boom in which profits soared by A$80 billion, while only A$9 billion extra flowed into national coffers.
“BHP is 40 percent foreign owned, Rio Tinto is more than 70 percent foreign owned. That means these massively increased profits … built on Australian resources, are mostly in fact going overseas,” Rudd told Australian radio.
The government has picked a fight with the country’s most important single industry, which accounts for about half of exports, in a gamble that taking money from rich miners and using it to boost workers’ pension funds will prove a vote-winner.
[pullquote]Prime Minister Kevin Rudd, in a pitch likely to strike a chord with voters, said Australians had been shortchanged during a 10-year resources boom in which profits soared by A$80 billion, while only A$9 billion extra flowed into national coffers.[/pullquote]
The hugely profitable iron ore industry, dominated by Rio Tinto and BHP Billiton, is seen as most vulnerable to the new tax.
Rio Tinto, the second-largest iron ore miner behind Brazil’s Vale and ahead of BHP in third, said new tax sent a bad signal to investors. UK-based miner Xstrata agreed.
Mining giant BHP Billiton announced disappointment with the plan, saying its effective tax rate on profits earned from Australian operations would increase from 43 percent to around 57 percent from 2013.
The company said that the mining resources in Australia contributed 18 percent to the country’s gross domestic product, with much of the profit put back into infrastructure projects.
BHP Billiton Chief Executive Officer Marius Kloppers said in a statement that a favorable tax environment was needed to make the Australian resource industry attractive.
“If implemented, these proposals seriously threaten Australia’s competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians,” he said.
[Mining Weekly]
Rudd good observation.But all along you kept quiet and only to announce the imposition this late during election.where ve you been Mr Prime minister?
This is exactly what we have been telling this myopic MMD government to do and they busy mock with the 90 days change plan. There is an answer for all skeptics out there. Anyway 2011 is not far , we shall put more money into the Zambian workers’ pockets. We shall bring back windfall tax. If these guys cut jobs when copper went to $3000 for ONE WEEK and they have not increased jobs with copper at 8 000, where are they taking the profits? They are not paying tax. Chingola roads are an eye sore. They are just ripping us off. Just pocketing profits and leaving HOLES in Zambia.. We shall WINDFALL tax them at 50%. Thank God they wont run to Australia.
2 True PF Cadre,
Those words do me a lot of good. I completely agree. How strong is the desire in the PF to tax the mines? Is it in the manifesto, are they running on it? (They should.)
And Zambia could teach Kevin Rudd a lesson in taxation by not taxing ‘profits’, as Rudd proposes, but revenues, which the mines will find much more difficult to hide. We can put ZRA observers at the mine entrances and monitor how many loads of ore are leaving the mine. Then they either pay their taxes and if they don’t, we just confiscate every 5th load. And if they still cheat, their licenses to operate in Zambia must be taken away.
Lumwana mines does not pay tax in Zambia but pays in Australia. Our GRZ is stupid for letting this to happen on our own soil.all Australian companies and individuals are taxable on income earned either inside or outside, Imagine this even those managers at lumwana mines who are regarded as expertraites hence tax free in Zambia are taxed in Australia on the income earned in Zambia. shame
And what is our Government waiting for?
These investors bought our family silver on projections of $2,000 per ton, and the price is now quadruple that. Meanwhile roads and other infrastructure in Chingola are deplorable. The same Vendata group has got mines in Australia and they do not complain over there. We need the money more than Australia does. Why are we so soft on these guys? I do not want to hear the same foolish excuse of “investment agreements say..”. Australia too has these agreements but the interests of the country are above these silly documents.
K11 if this is the state of affairs? if it is true, then it is a sad reading indeed. But were did you get these facts from? this sounds too sensational too be true?? Anyway any thing is possible on African soil, sad as it may be.
#6 Kevin D. I am a student here in Australia studying a bachelor of accounting and taxation. This month is my last study God willing. True All Australians are taxed on income earned in and outside of Australia. If an Australian works overseas, he/she is exempt for only 3 months. This is becoz they regard this period as the time they settle before they can be taxed. By an Australian I mean an individual which in this case includes both a person and company. Australian Mines here pay tax and they pay good rates ( wage) to an underground Miner $50/hour is an average in ZMK 200,000 per hour. But they still make profit and expand operations. But in ZED the pay is only 600,000 per month while an Indian at KCM gets $6000 per month non taxable. Where are we zambians. This really makes my heart…
KK11
thats very true,only one point though,an underground rigger gets more than 50bucks an hour,infact it $50 is just a minimum wage,and the same tax they pay,a certain amount is paid back to the individual at the end of each financial year,you and i have benefited from this tax return.Today if i get a job and im posted to work in zambia,i will be taxed in australia instead of zambia,they are taxed in their own countries simply because their salaries are done back home,money just goes direct into their accounts either on a weekly basis or fortnightly
Ok Red card but it is not that their salaries are done home no. There is a case of crocodile dandi I am sure you know this guy. The Australian Authorites want him for non payment of tax which
they believe he aquired from foriegn sources. He currently lives in the US.he has not filed his returns with the Australian authorities (tax office) for some years now. The monies paid back at the end of the year is in excess of what an individual has paid .i.e income less expenses ( work related)= taxable amount. Therefore because tax is paid on an ongoing basis (weekly/ monthly) which does not include expenses. God Bless Zambia
Well said #2
You are a true PF carder.
We need to take advantage of our own resources. They are ours!!!!!! Not theirs!
# 7 well explained. So kuvutika pa zed its a govt choice. Imagine giant mining conglomerates here in Australia have to heed to govt directives and they still make profits. Just what is wrong with zed???
This is what a responsible government does for its people as the holes left in the ground will never be refilled.
Alas, in Zambia we have a struggled with irresponsible leaders who do not understand simple logic. Recently, the minister of mines Mr Maxwell Mwale was quoted as saying that the the windfall tax would scare away infestors.
Quote,
“But mines minister Maxwell Mwale said the government would not re-introduce the windfall taxes because it would scare away investment in the sector.
“Zambia is not the only destination for investment and such laws will scare away investors who will take their money to other countries,” said Mwale
Could we have a comment from the homophobic bootlickers, mr capitalist, veteran, senior citizen, and other lumpens.
#7 KK11 spot on
I have mentioning the same thing on the blog several times. I tend to wonder what the government in Zed in doing. Ad you see the thing is Australia sells to China also just a Zambia does. The products are going to the same destination. The still make lots of profit and they still develop their country but back home, they decide to give the mines tax holidays. That’s why the late president LPM introduced windfall taxes which he used to boost the economy and to develop the country. He had the heart for the ordinary Zambian. The same with the Australian government Look at Rudd he is doing it for the people. The Zambian government does it for personal gains.. Why didn’t the investors run away after windfall taxes and the ones in Australia are not running away they will…
The mining investors in Zambia cannot run away and invest in other countries because the minerals they are interested in, can only be found in Zambia in the quantities and qualities that are profitable.
So, the minister of mines should not expose his ignorance and cheat the People of Zambia who are able to see through his lies.
I hope RB can take a leaf from this Australian PM, but i wonder can someone with a small brain ever learn, bring back windfall tax.
Ladies and gentlemen, no mine investor can run away if GRZ introduces windfall tax in Zed,that is business and minerals or these natural resources they want are found in Zed and have also taken advantage for using very very cheap labour.
GRZ should introduce such measures not for personal gain but for the people
Congratulations for a Zambian Student in depth analysis – I know you will make it for the Studies!!
Taxation on resource profit means taxation on the resource itself or in short throughput. The danger with this is that very few allowable deductions exist and as such the companies will strive to slow down investments, cut jobs massively and probably relocate into lower tax havens. What Zambia needs is sound financial reforms centered on better financial regulations enshrined in gapless standards. This will take care of systematic risks by reverse regulation where the economic cycle experiences ups and downs. What Kelvin has done is constraining the resources of these Companies in order to stay in power. Zambia should not do that.
#18 Mavimba
Taxing companies on profits is the best way which is fair on companies. take for example a company pays tax at 30%. if this company records a revenue of K10,000 before tax. the tax will be K3000. now if tax was to be paid on profits the answer is different. for example same revenue of K10,000 and expenses of K2000 = K 8000 * 30% = 2400. the company therefore saves K600. this is a Simplified Tax System adopted by mainly all western world countries and it really works well in my opinion. Unlike Zambia we tax on revenue that is why you find most companies try not to pay tax.
You dont expect to read comments from MMD dogs on such issues,I can bet you my last $ they would never comment,they know the truth and would rather burry their heads in shame,what a bunch of hipocrits
#19 Mwanya bane
I am not against the idea of taxing profits. What I do not agree with is taxing RESOURSE PROFIT. This is almost the same as taxing revenue. What I understand of resource profit in simple accounting language is Gross Profit. You see there are very few allowable deductions if none in this. I have no qualms about your analsis and we seem to be singing from the same hyme sheet.
Bravo idea Aussie PM. I hope Zed govt will learn from you. I think the problem in Zambia is corruption. International companies tend to corrupt govt officials. E.g. Mecedes Benz was fined in USA recently, for currpting many countries.
Also big companies are good at evading tax. We must find a way of benefitting from our natutral resources. Let’s tax the gross profit because targetting net profit will never give us much. They will always dribble us, even apart from corruption. Viva Aussie PM Rudd.
Another way is to have all copper mining countries work together like OPEC. In this way these greedy investors will not run between countries, playing us against each other, to their benefit. They are greedy. RB should talk to Rudd and others.
18 Mavimba,
” The danger with this is that very few allowable deductions exist and as such the companies will strive to slow down investments, cut jobs massively and probably relocate into lower tax havens. ”
You are just trying to scare people into not taxing the mines. The danger of taxation is that very few allowable deductions exist? This is not even true, but if it was, it would be irrelevant.
Companies are supposed to pay taxes, and the only country they could ‘run to’, would be Chile, which has much higher taxes than Zambia already. And they aren’t going to run away from copper because prices are at record heights.
So please stop making excuses for why the mines should not pay taxes, but workers in formal employment should. The tax burdon was shifted to them.
#23 MrK
I am not scaring anyone and I think you probably do very little research. This is what is on the ground: Mr Rudd said he expected the mining industry to mount a political campaign against the reforms.
“Of course there’ll be threats of project closures and the rest,” he said.
Big miners are unhappy, saying the existing tax regime is equitable and changes will lead to job and investment losses…. Back to the point, these companies mine in high value minerals and the plead with Aussi govt. If matters reach this far I do not think they would do the same for copper whose value is volatile. Open up man. We all want a share of the resource value but not in a crazy way.
Yeah good comment from the zed in Australia. So, LPM was a visionary, people. Look at this, he talked and implemented this years befire his death and ausies are just learning about it.Then we go put RB who goes on kissing some chinese but and removes the same tax that shud help us with infrastructure and deviation fund that levy wanted to set up. Most of our big plans to promote agric projects have stalled, and guess what, we have a president eager to learn in Tanzania at the age of 69 or 70, … ooops. Sorry MMD.
#23 Mrk
Latest, the federal government’s planned new mining tax may have claimed its first casualty, with iron ore explorer Cape Lambert Resources scrapping a project it said could have been worth around $400 million.”It is going to be easier to generate value by spending money offshore. Sierra Leone is going to be a better investment proposition than Australia,” Mr Tasker said. You know what this means, a squize on the stock market where others can raise finance and a cut in investment and massive job losses. Do you think they will give a dame about our volatile copper?