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Sydney - Australia's proposed 40% tax on mining profits could drive major companies offshore, global credit rating agency Moody's warned on Tuesday.
By replacing a lower but "complex and variable" royalties regime Moody's said the Resources Super Profits Tax (RSPT) could reduce firms' earnings by nearly one third and make Australia a less lucrative investment destination.
"Australia's mineral resources will stay put, but global producers such as BHP (Billiton) - with half its assets in Australia - and Xstrata, with a third, can decide whether to extract the minerals or shift some operations to lower-cost countries to avoid the higher tax regime," Moody's said in a note to investors.
Other resource-rich nations such as Canada, Brazil and China "may figure more favourably in global miners' plans if Australia enacts the RSPT," Moody's said.
"The global search for the most competitive returns could also lead to a slowdown in the breakneck pace of external shopping, particularly from China, for Australian mining assets," it added.
Insatiable demand from China for resources such as iron ore and coal has been credited with helping mineral-rich Australia become the only major advanced economy to avoid recession during the global downturn.
Leading miners including BHP, Rio Tinto and Xstrata have attacked the proposed tax as a risk to Australia's prosperity, and some projects have been placed on hold or under review.
Moody's said suspension or review of "borderline" projects could support commodity prices by reducing supply, while the levy would reverse a "steep decline" in the effective average tax rate of the resources sector.
It could also lead to more efficient development of the emerging liquefied natural gas sector, which already has some $70bn slated in foreign and Australian investment, it said.
But overall Moody's said it had concluded that the "net effect of the tax on resources companies will be negative".
"The increasing uncertainty over investment decisions, particularly in a highly unpredictable operating environment, will undoubtedly have significant strategic implications for resources companies," the ratings agency said.
Moody's cited the "cautionary tale" of Zambia, which was forced to repeal a similar tax in 2008 which "likewise upset foreign mining firms and was blamed for a reduction in mining exploration".
Small Business Minister Craig Emerson Tuesday said Canberra was open to consultation on the 6% threshold defining a "super profit", but insisted it would apply to new and existing projects at a rate of 40%.
- AFP
