The cost of tax imposts
By John Miller, Editor
Nobody likes taxes, particularly new taxes, and it seems the mining industry is no exception.
Much has been said, and written, about Australia's proposed new Mineral Resources Rent Tax (MRRT) which undoubtedly played a role in eroding the Federal Labor Government's majority to the point where Australia now faces a hung parliament.
But it is not just the Australian mining industry that has reacted to a new tax impost, with Quebec and Nevada in North America both losing their shine as mining investment destinations.
The Fraser Institute, Canada's public policy think-tank, has recently released the 'Survey of Mining Companies: 2010 Mid-Year Update' which indicates that mining executives and investors are looking far less favourably at jurisdictions that have introduced or are considering new taxes and regulations on mining activity.
Hardest hit among jurisdictions once considered mining-friendly is Australia, which saw a dramatic decrease in survey rankings. South Australia dropped to 15th place overall from 10th, Western Australia fell to 28th from 19th, the Northern Territory dropped to 30th from 14th, Queensland declined to 33rd from 24th, and New South Wales plummeted to 38th overall from 20th.
The results reflect the mining industry's reaction to the Australian government's proposed Resources Super Profits Tax (RSPT). Although the tax was cancelled after the survey was conducted, miners will still face significant tax increases from the MRRT.
Survey coordinator Fred McMahon, who is also the Fraser Institute's vice-president of international policy research, says "Despite cancellation of the RSPT, it is unclear how the mining industry will react to new tax changes, especially since the structure of these changes remains uncertain.
The decrease in Australian rankings was mirrored by Quebec and Nevada.
Quebec, which topped the annual survey for three years running, saw its ranking drop to third overall and this is likely to be related to increases in Quebec mining taxes that were announced by the government without consultation and proposed changes to the provincial Mining Act.
The mining-friendly American state, Nevada, saw its ranking plunge to 10th overall from third with miners concerned about a significant new tax on miners that was proposed in a state referendum. Although the referendum petition failed, the state government enacted a one-time mining tax.
Elsewhere, Chile dropped from fifth to sixth after the government proposed a new mining tax, which was later defeated in the country's Congress.
Fred McMahon says: "The results of this survey make one point abundantly clear -governments that change mining policies in mid-stream without consulting the industry risk driving away investment."