Shares of mining giants BHP Billiton and Rio Tinto tumbled Monday after the Australian government proposed a new 40 percent tax on the booming profits of resource companies.
The big miners' losses dragged the Australian market down by about 1 percent in morning trade after Prime Minister Kevin Rudd announced Sunday that the tax would be introduced in 2012 and raise an additional 9 billion Australian dollars ($8.3 billion) per year.
The new tax targets miners that have made bumper profits as burgeoning demand from manufacturers in China and India pushed up the price of iron ore and other commodities.
The mining industry has warned that such a tax would stall investment or shift it to other countries.
Analysts say the reforms are aimed at attracting votes for the ruling Labor Party which will seek a second three-year term in government at elections due late this year.
Rudd said he expected the mining industry would campaign against him ahead of the elections. He said BHP Billiton was only 60 percent Australian-owned and Rio Tinto was less than 30 percent Australian.
"That means these massively increased profits ... built on Australian resources are mostly ... going overseas," Rudd told Australian Broadcasting Corp. radio on Monday.
Monday, May 3, 2010
Kevin Rudd to tax the hell out of mining companies for votes.
It must be election time as Chairman Rudd decides to tax one of the main industries that has kept Australia out of recession due to a booming business.