Australian vote heightens tax uncertainty
Monday 23 August 2010
Several FTSE 100-listed resources companies are set to face nervous markets this morning, in the first day of trading since Australia's indecisive election result over the weekend raised the spectre of more changes to Canberra's planned super-tax on mining industry profits.
Earlier this year, BHP Billiton, Rio Tinto and Xstrata agreed a watered-down set of proposals with Labor Prime Minister Julia Gillard, after she replaced Kevin Rudd as premier. Ms Gillard agreed to a 30 per cent levy on the industry, after Mr Rudd's proposals for a 40 per cent led to the miners threatening to withdraw investment from Australia.
But Ms Gillard may be forced to renege on the agreement if she wants to form a coalition after Australia's first inconclusive election since 1940. The Labor party and the Liberal opposition, led by Tony Abbott, have already started wooing independent MPs.
Before the election, analysts suggested that Labor's best chance of returning to office lay in a deal with the Green MPs, who may demand an increase in the mining tax as their. Green officials had indicated they may press for a larger tax than even Mr Rudd had proposed, with some pushing for a 50 per cent levy. So far, however, just one Green MP has been returned.
The fiscal effect of a government led by Mr Abbott is likely to be welcomed much more readily by the markets. The Liberal party has campaigned against a tax on the industry's profits and instead plans to introduce an exploration funding programme if elected.
Last night, Labor had amassed 72 seats, compared to 70 for the Liberals with 78 per cent of the votes counted. Either party would need 76 seats for a majority.
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