Australian Government Wants to Impose 40% Tax on Mining Profit

talk about killing the goose that lay golden eggs...

Whether it is a struggling economy like Greece, or a debt-laden country like the US, or a booming economy like Australia, what the governments do is the same: trying to extract more and more money from the productive sector of the economy and distribute it to the unproductive sector. They rarely fail in their endeavor to do so.

Mining shares tumble on Australian tax plan (5/3/2010 AP via Yahoo Finance)

"CANBERRA, Australia (AP) -- 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.

"Shares in BHP Billiton, the world's biggest miner, fell 3.7 percent in early trading while Anglo-Australian rival Rio Tinto shed 5.6 percent.

""The resources stocks are really getting carved up this morning given the land grab by the federal government," said Austock Securities stockbroker Michael Heffernan.

"After the tax announcement, BHP Billiton said the measure would raise the total effective tax rate on the company's profits from 43 percent to 57 percent." [The article continues.]

The move by the government of Prime Minister Kevin Rudd (Labor Party) is seen as a ploy to attract union and blue-collar workers in the election later this year.

Australia never went into recession in the global turmoil caused by the US financial near-meltdown in 2008, thanks largely to its booming mining industry. The country was the first to raise interest rates to curve inflation. Looks like Rudd's government has found a way to cool the economy back into deep freeze.

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