Global Tax Update

The last quarter has been relatively quiet in terms of developments in mining tax policy; at least compared to the two preceding quarters. However, while the volume has been low, there have been two significant developments in Australia as well as further developments in Africa and South America.

These developments have obvious implications for the economics of investing in the relevant jurisdictions and provide some lessons concerning engagement with government.

1. Australia – MRRT

   In the early hours of the morning on 24 November 2011, the Australian Labor government succeeded in passing a revised version of its Mineral Resource Rent Tax (MRRT) through the lower house of the Australian parliament. The tax was passed with the support of minorities and it appears the government has the numbers to pass the tax through the upper house early this year, with the tax expected to apply from 1 July 2012.

   The tax, which began life as the Resource Super Profits Tax (RSPT) under former Labor Prime Minister Kevin Rudd, has a substantially lesser application than the original RSPT and was diluted further as a result of an eleventh hour compromise made with an independent MP to ensure the tax passed the lower house.

   In summary, the key features of the MRRT, as passed by the lower house, are as follows:

   Commencement: 1 July 2012; Applicable to coal, iron ore and magnetite only; Applicable only to miners with an annual profit of A$75m or greater; Headline rate of 30% of profits, reduced for all miners to an effective rate of 22.5% (as a result of an available extraction allowance) and further reduced on a sliding scale for miners with annual profits of between A$75m and A$125m; and It will enable the government to cut the general company tax rate from 30% to 29% from 1 July 2013. 2. Australia – Carbon Price

   After many years of debate, an Australian carbon price was passed into law on 18 November 2011. The key features of the new legislation are as follows:

   The scheme will apply only to carbon dioxide, methane, nitrous oxide and perfluorocarbons. It will not cover hydrofluorocarbons or sulphur hexafluoride; the other two greenhouse gases referred to in the Kyoto Protocol The scheme will operate in two phases: a fixed price carbon tax from 1 July 2012 to 30 June 2015, followed by a floating price / cap and trade scheme thereafter; The scheme will apply to entities controlling facilities that emit greater than 25,000 tonnes of carbon dioxide equivalent per...