IMF Endorses Australian Mining Tax

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

24 June 2010

The deputy head of tax policy at the International Monetary Fund (IMF), Philip Daniel, has told a tax conference in Sydney that the Australian government's planned Resource Super Profits Tax (RSPT) would strengthen of Australian public finances over the long-term, reduce risk of absolute loss for investors, and leave a substantial share of resource profits in private hands.

Philip Daniel said there were a number of benefits in the RSPT which could also be adopted in other countries. "IMF staff welcome the RSPT proposal in principle. It shifts the whole Australian resource tax system strongly in the direction of neutrality," he said.

"The argument on tax competitiveness too tends to ignore the fact that the new proposals incorporate large risk bearing by government - to the extent of 40% of losses and more in the case of exploration," he explained. "Few other jurisdictions seeking petroleum and mining investment are able to offer that."

"The tax proposal doesn't show adverse effects on Australia's economic prospects either. Consensus forecasts offer evidence that the outlook for business investment has in fact strengthened for Australia in recent months," he added.

His views contradicted a research report just released by Ernst & Young on behalf of the Chamber of Minerals and Energy of Western Australia and Xstrata plc, which concluded that the RSPT would, if implemented as proposed, have an adverse effect on Australian mining employment, mining investment and the Australian economy.

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