Australian Mining Tax 'No Threat To Chinese FTA'

by Mary Swire, Tax-News.com, Hong Kong

28 May 2010

Australia’s Minster for Trade, Simon Crean, has tried to dispel fears that concern in China about the imposition of Australia’s new mining tax would affect the ongoing free trade agreement negotiations between the two countries.

“What China wants is security for their resource needs going forward,” he said in an interview with Reuters Television. “At no stage in any of the discussions was concern raised about this tax in terms of its impact on investment in Australia.”

He added that the only time the resource super profits tax (RSPT) was raised was in relation to a potential impact on mineral prices. He had, however, made it clear that the RSPT would not put upward pressure on prices as it was a tax on profits, while the resources are traded and priced on international markets.

He also stipulated that, in his opinion, the argument that the RSPT will be bad for investment in Australian mining is not valid. He believes that the structure of the tax will actually encourage the expansion of investment because, under the current regime, royalties have to be paid before any profit is achieved. Under the RSPT, additional tax will only be paid after a certain level of profits is achieved.

He concluded that the Australian government was “restructuring sensibly the tax base that applies to the mining sector, and that’s got to be a good thing in the minds of the Chinese. That's why you haven't heard any threats from them despite what some people have argued about this being an impact on investment.”

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