Mining shares dip as tax plan sinks in

Shares of BHP Billiton and Rio Tinto tumbled yesterday after the Government proposed a new 40 per cent tax on the booming profits of resource companies.

The big miners' losses dragged the Australian market down by half a per cent after Prime Minister Kevin Rudd said on Sunday the tax would be introduced in 2012 and would raise an extra A$9 billion a year.

The tax targets miners who 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 per cent in early trading while Anglo-Australian rival Rio Tinto shed 5.6 per cent. BHP Billiton closed down 2.99 per cent, while Rio Tinto ended down 4.3 per cent.

BHP Billiton said the measure would raise the total effective tax rate on the company's profits from 43 per cent to 57 per cent. BHP Billiton posted profits of US$6.14 billion for the six months ending December 31, more than double the result of a year earlier.

Rio Tinto's Australian managing director David Peever said the new tax would make the Australian mining industry the highest taxed in the world and less competitive. Rio Tinto reported profits of US$4.9 billion for last year, up 33 per cent over the previous year.

Peever said the strength of the mining sector had kept Australia out of recession at the height of the global financial crisis.

"But the same industry is now being portrayed by the Government as not paying its way."

- AP