Australian steelmaker OneSteel Limited has joined the critics of the Australian government's proposed Resources Super Profits Tax, with a letter sent to shareholders by its chairman Peter Smedley.
Stressing that the proposed tax's potential significant adverse impact on OneSteel, its employees, local communities and shareholders, Mr. Smedley expressed his concerns in relation to the following issues:
1) Application of the tax retrospectively, by changing the tax rules after investment decisions have been made;
2) Application of the tax to iron ore, dolomite and limestone resources which are not sold but are used to feed OneSteel's steelmaking operation and which will significantly increase the cost of raw materials and therefore the producer's steelmaking;
3) An inadequate shelter for normal profits. The inference that a ‘super profit' is any return above the risk-free government bond rate, makes the RSPT a super tax on profits rather than a tax on ‘super profits';
4) The 40 percent RSPT tax rate, which is high by world standards and, combined with company tax, represents an effective tax rate of 56.8 percent;
5) The transitional relief and capital allowances, which provide little shelter for OneSteel;
6) Lack of clarity on whether credits will be available to cover future increases in state government royalties and other state resource taxes.