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Wayne Swan, Australia's Deputy
Prime Minister and Treasurer, has expressed his contentment after the
ratification of a new mining tax which has been debated in Parliament for
close to two years. The
government hopes that this 30% tax on coal and iron ore production will boost
its revenues by approximately A$11 billion. The companies affected by this tax
expressed disappointment, with many saying that this so-called super-tax will
negatively affect investment in the country's commodities sector – an
extremely important component of the Australian economy.
After the severe financial crash
in 2008 many countries took measures aimed at stimulating their economies,
with Chinese commodity demand proving especially robust given the Chinese
government’s efforts to boost infrastructure and housing construction.
China recently accounted for more than 40% of industrial commodities, and
commodity producing countries such as Australia and Canada have enjoyed
relatively good economic fortunes since the financial crisis. This is in
contrast to countries like the US, UK, and other western European nations,
where the services and financial sectors form much larger parts of economies
relative to commodity production.
But these developments awoke the
interest of the Australian government, and by 2010 it announced its plans to
implement a so-called super-tax on mining companies' profits. Hitherto,
discussions at the Australian Parliament have been heated, with both opposing
parties and mining companies describing the measure as a financial suicide.
Analysts have calculated that in
total, the Australian mining industry could suffer profit losses of up to
30%. Ratings agencies forecast that this new tax will also increase
international investors' doubts about the mining sector, and could damage the
entire mining sector’s creditworthiness. The production of coal and iron
ore is one of Australia's most important means of income. BHP Billiton,
Xstrata and Rio Tinto will be some of the companies to suffer from this new
levy. So far, however, plans to extend this tax to gold and uranium producers
have failed.
Other governments have been
watching Australia's tax plans with interest, with investors fearing that
other important commodity producing countries might follow Australia's
example. Brazil, the world's second-largest iron ore exporting country after
Australia, has long been considering imposing a tax on commodity exports and
increasing mining-licence fees.
The Australian Association of
Mining and Exploration Companies (AMEC) vehemently criticised
this new tax, stating that it will undermine Australia's competitiveness at
the world markets and reduce foreign investment into Australia. According to
AMEC, this tax has dealt a serious blow to the country's reputation as a good
business environment, and will damage investors’ faith in Australian
legal protection
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