PERTH (miningweekly.com) – Western Australia mining companies on Thursday called on Prime Minister Kevin Rudd to scrap the proposed 40% tax on resources profits.

A group of miners, including iron-ore producers Fortescue Metals, BC Iron, Gindalbie Metals and Brockman Resources, said that the implementation of the proposed super profits tax (SPT) would have “serious ramifications” for investment in the sector, which in time would affect the downstream industries.

It argued that the structure of the tax meant that the government had “forced” itself between companies developing new projects or planning expansions and their financiers.

Swan Gold chairperson Michael Kiernan said that smaller companies, which historically had difficulty raising capital in the Australian market, would find it “virtually impossible” to raise local financing if the tax was imposed.

“The truth of the matter, is that projects today that are in the works will get up and going, but I can tell you that we will now shift our focus to Indonesia,” he told journalists in Perth.

Brockman MD Wayne Richards agreed with Kiernan, saying that the SPT would have a significant impact on the net present value of projects, consequently creating a challenging environment for the company to raise equity.

“It is only the best projects that will survive, and there is an opportunity that companies will have to invest offshore, at higher capital rates, to ensure funding for their projects.”

The mining sector is currently Australia’s highest taxed industry, at an average rate of 43% over the past nine years. The imposition of the new super tax will increase the total tax on the industry to 57%, making it the highest-taxed resources industry in the world and potentially rendering the country’s companies and its products uncompetitive on world markets.

“International markets are looking very closely at Australia and its investment profile going forward,” said Fortescue executive director Russell Scrimshaw.

“The government needs to kill this tax as quickly as it can, so that projects from junior miners and Fortescue’s expansion projects can go ahead with a clear view of the game we are playing.”

Fortescue director Andrew Forrest said that the company had every intention of completing its expansion programme, however, he called on Canberra to scrap what he called a 40% nationalisation of the mining industry.

Forrest noted that the “incorrectly described” tax on super profits would affect blue-collar workers as soon as industry focus moved offshore, and the Australian industry shrank.

The group said that the imposition of a super tax on the minerals sectors set a narrow revenue base to fund broad-based expenditure, which created revenue sustainability issues for the government.

The cyclical nature of the mining sector, when combined with the brakes this super tax would place on growth, was likely to significantly reduce the revenue windfall to government over time, the miners argued.

Rudd met with mining representatives earlier in the week to explain the new tax, which will be imposed in 2012.

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