This pre-election move to tap into the nation’s mining boom is expected to set up a potential clash between the Rudd government and resources companies which make up 9% of the economy.  A 40% levy and double taxation with state royalties would threaten US$108 billion (RM343.82) worth of planned investments.  Australia will have the highest taxed mining industry in the world.  The news has also sparked an immediate reaction from the opposition that may serve as a preview of the election campaign.
The introduction of the resource tax would affect Australia’s competitiveness.  BHP, the world’s biggest mining company with 51% of its assets in Australia, will have earnings cut by 19% as a result of the tax.  Rio Tinto, the world’s second largest iron ore exporter, which has about a third of its assets in Australia, would see a 30% earnings cut.

The government will use the resource tax revenue to create an AUD5.6 billion infrastructure fund, cut company taxes to 28% in mid-2014 from the current 30% and boost retirement funds, now worth AUD1.3 trillion.  It will also give a tax concession for resource exploration affecting 4,300 companies.

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