Rio Tinto joins in tax discontentedness

[miningmx.com] — RESOURCES giant Rio Tinto on Tuesday added its voice to the chorus of miners that have expressed disappointment at the misrepresentation of the level of taxes it pays on its Australian operations.

This follows suggestions last week that resources groups active in Australia are not
paying a fair share of tax – something that has prompted the Australian government to propose a 40% tax on the ‘super profits’ being reaped by mining companies.

Australia’s federal government has said multinational miners in Australia paid less
company tax than they would in North America and the UK.

These claims were based in the findings of a US-based research paper that has
found multi-national mining companies only pay an effective company tax rate of
13%.

But Rio Tinto has now joined BHP Billiton in refuting the claims.

Rio Tinto said more than Aus$20bn was paid in corporate taxes and royalties
alone in the past 10 years with the group’s effective tax rate averaging more than 35%.

Guy Elliott, chief financial officer at Rio Tinto, hoped this data, verified by
independent external auditors PricewaterhouseCoopers, would help end much of the
uncertainty created by contradictory information that had emerged since the
Australian government proposed its mining super tax in early May.

“These figures confirm previous statements made by Rio Tinto about the level of
tax paid in Australia. Misleading information propagated by other parties has not
facilitated a proper dialogue about the importance of the minerals sector to all
Australians. That’s why we thought it was important to get the facts out there,” Elliott said.

Rio Tinto said it paid Aus$11.2bn in company tax and Aus$4.1bn in royalties in the past five years alone while corporate taxes amounted to Aus$14.6bn and royalties were Aus$5.7bn in the period 2000-2009.

The group said its rate of taxation over the 10 years to 2009 averaged 35.6% of its
earnings before tax payments in Australia.

Rio Tinto has generated net profit after tax of Aus$37.4bn in Australia in the
10 years to 2009.

During the same period the company re-invested more than Aus$38bn back
into Australia through capital expenditure (Aus$26.4bn) and acquisitions (Aus$12.0bn).

By contrast, BHP Billiton in the 2009 financial year paid total taxes to
Australian governments of Aus$6.3bn, resulting in an effective tax rate of around
43%.

BHP Billiton chief financial officer Alex Vanselow last week expressed concern
that lower tax rate numbers were being attributed to the tax paid by BHP Billiton.

“It concerns BHP Billiton that inappropriate conclusions appear to have been drawn
from a study by two academics from a US university. A more accurate and
meaningful method is to use the actual tax payments and returns submitted by
companies in Australia,” he said.

BHP Billiton said it pays three broad levels of taxation on earnings in Australia –
company tax, paid on the taxable income of the business; royalties, paid on the value and/or volume of resources extracted; and other production taxes, paid on the value of oil and gas resources extracted.

Total taxes paid by BHP Billiton’s Australian operations in relation to the financial
years 2004 to 2009 inclusive exceeds Aus$24bn.

“The 2009 earnings of BHP Billiton’s Australian operations were almost fully reinvested back in Australia in the form of taxes, royalties, capital applied to new and existing projects and dividends to shareholders,” Vanselow said.

Both Rio Tinto and BHP Billiton have warned that the proposed super tax would
hamper investment and job creation in Australia while damaging the country’s
international competitiveness.