Australia announced plans to levy a 40 percent tax on mining profits generated by resource companies.
The government expects to raise $8.34 billion a year from the "super-profits" tax, scheduled to apply from July 1, 2012.
The tax would help pay for the country's infrastructure spending and retirement funds as part of a major overhaul of Australia's tax system.
In making the announcement Sunday, Australian Treasurer Wayne Swan said Australians deserved a "fair share" of the country's non-renewable resources.
Swan explained that the 40 percent on profits from resources would apply after allowing for extraction costs and the recouping of capital investment. He said that companies wouldn't pay the tax until they had provided shareholders with a normal return on capital investments and then only on any additional profit.
"It will be a better way to tax resources because it only taxes profits and fully recognizes the large investments made in resource projects," he said.
Yet tax hikes would be significant for the mining sector, Australia's most globalized industry.
For example, BHP Billiton, the world's biggest resources company with 51 percent of its assets in Australia, said in a release that under the new tax measures, the rate on its Australian earnings would increase to 57 percent in 2013 from 43 percent now.
That compares with a tax base in the United States at 40 percent and Brazil at 38 percent.
"Australia's hard-earned reputation as a stable investment environment will be dramatically undermined," said Mitch Hooke, chief executive of the Minerals Council of Australia in a statement.
"This tax makes Australian mining uncompetitive," Paul McTaggart, an analyst with Citigroup, Inc. wrote in a briefing paper.
"The new Resources Super Profits Tax proposed by the government is messy, complex and in our view increases the difficulty in understanding the tax structure in the Australian mining space. We see it as a tax structure that will ultimately hurt mining investment in Australia (especially by offshore companies) and increase uncertainty and volatility surrounding companies' profitability," McTaggart wrote.
Auditing firm Deloitte predicts the super-profits tax would cost the mining industry an additional $2.78 billion for 2012-13, the first year it takes effect, and $8.34 billion for 2013-14, Mining Weekly Online reports.
"If implemented, these proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians," said BHP Chief Executive Officer Marius Kloppers.
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