TAX NEWS - JUNE 2010

Australia Tax: Future Fund Chief Says Resources Tax Must Change or Be Dropped

by Angus Whitley, 04 June 2010 -- Australia's sovereign wealth fund called for the government's planned resources tax to be amended or scrapped, saying it risks eroding the country's appeal to investors.

"There are several significant flaws," Future Fund Chairman David Murray said in a video interview posted on the Business Spectator's website. "The tax has to be changed or abandoned."

The tax shouldn't be applied to existing resources projects, Murray said. Mining royalties could alternatively be directed into a wealth fund, he said.

Criticism from the Future Fund, a government-owned entity with A$68 billion ($57 billion) of assets, increases pressure on Prime Minister Kevin Rudd as Australian miners ratchet up their campaign against the planned 40 percent tax on so-called super profits. Murray said he'd be "extremely concerned" as a mining company.

"If we can't achieve a design that does not penalize existing projects, that's a sovereign risk issue," Murray said in the interview. "If there's a change, there has to be some process of putting aside returns from resources depletion for the longer term. Unless we do that, we'll be directing resources taxes of one sort or another to recurrent spending of government, which will cause significant problems later."