Iron ore industry comments on tax proposals

A number of iron ore executives believe the imposition of a new tax on the growing sector would have a disastrous effect on future investment in the industry. Collectively they are calling on the Federal Government to urgently consult with the industry before imposing a new tax burden.
The comments were made by Fortescue Metals Group CEO Andrew Forrest and non-executive director Graeme Rowley, along with Murchison Metals executive chairman Paul Kopejtka and BC Iron managing director Mike Young.
In a statement the mining executives said:
“Iron ore generates substantial wealth for Australia, but the future health of the industry cannot be taken for granted. Iron ore mines are large expansive projects which require billions of dollars in capital to establish. A Federal tax imposition severely jeopardizes the ability of Australian companies to access this capital in future.
“For politicians in Canberra to propose a tax smash and grab just as the resources industry is getting back on its feet after the effects of the GFC is particularly bizarre. As an industry we are ready to lead the national economy out of the GFC and generate continued real economic growth for the country, not stimulus supported activity.”
They said that slowing down growth of the wealth generating sectors of the economy to the “pedestrian speeds” set in other states was not in the best interests of Australia.
“We also have grave concerns about the incentives this gives to foreign owned miners extracting Australian resources for sale to their home country. As a tax based on profits, unlike State-based royalties based on production amounts, the incentive for offshore based miners to minimise stated profits whilst producing and extracting as much of our resources as possible is only enhanced.
“We need a supportive Federal Government, working to solve our infrastructure, investment and skills challenges, not trying to stifle growth and grab as much revenue as possible from the industry.
The statement also said that the Federal government cannot treat the iron ore industry as a cash cow to be continually milked, as Australia is not the only country blessed with iron ore resources. Forrest, Rowley, Kopejtka and Young noted that over recent years Australia has lost iron ore market share to other countries, such as Brazil and the fast growing supplies of India. They believe a prohibitive taxation regime will only encourage this move, as scarce international capital is devoted to other existing suppliers as well as the building of new supply sources in Africa.