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Australia to Levy Mineral Resource Rent Tax
Mar 22,2012 10:50CST
industry news
Source:SMM
Australian government will levy mineral resource rent tax of coal and iron ore to super large mines starting July 1st this year.

SHANGHAI, Mar. 22 (SMM) -- The contradictory Minerals Resource Rent Tax (MRRT) of Australia won the vote by 38 to 32 in the Senate. Australian government will levy mineral resource rent tax of coal and iron ore to super large mines starting July 1st this year.

As calculated by the Ministry of Finance of Australia, tax income would have increase by AUD 14 billion (USD 14.9 billion) if they levied mineral resource rent tax on iron ore and coal to large mines including BHP Billiton and Rio Tinto in the past three years.

Many Australia-based mines are against the tax as their benefit will be affected, and they have gone so far as to threat the government. Fortescue Metal has inquired a lawyer so that it will launch an appeal on the tax issue to the Supreme Court. The spokesman of the company said the mineral resource rent tax is unjust, numerous, ineffective and will cause investments and employment in the resource industry to fall. He said the company will commence legal procedure once the law is implemented.

Steelease understands that despite actual costs at mines will increase given allowance, deferred and losses, actual tax rate to be levied will be much lower than 30%, so any increased costs to Chinese consumers will be limited. According to the chart below, mine giants such as BHP Billiton and Rio Tinto which have many projects can offset profitable projects with some deficit project so as to reduce tax rate. As such, actual tax rate for such companies is the lowest, with only 10.38%. Actual tax rate for project which has commenced before the implementation of MRRT, and is the only project of the company is set at 11.78%. Virtual tax rate for project which commences after the MRRT takes effect is the highest, with 15.53%, but still much lower than the 30% of MRRT.

Domestic coking coal imports made from Australia were 32.556 million mt in 2011, accounting for 17.9% of total domestic coal imports, down from 35% in 2009. In the meantime, imports from Mongolia increased remarkably with transportation advantages. China does not rely as heavily on imported coal as iron ore since it is the largest coal producer in the world, and coal imports from Australia should fall once coal prices in Australia rise due to mineral resource rent tax. As such, Steelease believes despite the levy of mineral resource rent tax by Australia will push up international coking coal prices as it is the largest coal exporter in the world, effects on China will be limited.


 

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