By Clancy Yeates
A SENIOR official from the International Monetary Fund has challenged resource industry claims that the competitiveness of Australian mining will be harmed by the proposed ''super profits'' tax.
In an advertising blitz, miners argue Australia will become the most highly taxed mining nation, with a total rate of 58 per cent once company tax is included.
But the deputy head of the fund's tax policy division, Philip Daniel, said it was misleading to look only at the headline tax rate created by the 40 per cent levy.
Mr Daniel, who was expressing his own views and not the fund's, said this failed to consider other concessions to miners, as well as non-tax charges in other jurisdictions.
''The argument that the headline rate is exceptional doesn't really stand up,'' Mr Daniel said at an Institute of Chartered Accountants conference in Sydney yesterday. ''It does not take account of the combined effect of multiple levels in other countries, including the concessional state participation schemes that exist in many places.''
Complaints about competitiveness also failed to take into account the government's promise to reimburse miners for 40 per cent of losses on failed projects through a tax credit.
''Few other jurisdictions seeking petroleum and mining investment are able to offer that,'' he said.
In contrast to claims the tax will raise Australia's sovereign risk, Mr Daniel argued that its design made future changes less likely than under the current royalties regime.
''The new tax is designed to be responsive to changed circumstances and its impact is known and certain for companies in advance, whereas royalties are not responsive and are more vulnerable to unexpected change,'' he said.
For instance, the government of Western Australia this week raised iron ore royalties levied on BHP Billiton and Rio Tinto to 5.625 per cent, from 3.75 per cent.
Mr Daniel was commenting on a new paper on the tax by a visiting fellow at the Australian National University, Ben Smith.
The paper, Slimming The Goose: Less Foie Gras but More Golden Eggs?, argued that the government should alter the tax by contributing 40 per cent of investment costs up front, to reduce business uncertainty. In contrast, the government proposes to be a ''silent partner'' that will claim 40 per cent of profits but also refund 40 per cent of project losses.
Mr Smith said no matter how generous transitional arrangements were or how clear it became that sovereign risk fears were exaggerated, miners would still oppose the tax because they expected to make more than the ''required, risk-inclusive rate of return'', or a ''super profit''.
''With new projects, the more the mining industry kicks and screams about the tax, the more you know that there's something there that you ought to be grabbing,'' he said at the conference.