Mining tax embarrassment as Rio funds returned
In a blow to the Labor government less than a month before the federal election, review work by Rio and the tax office since June 30 has shown the multinational miner was not liable to pay any tax for the 2013 financial year.
The mining tax forces companies to estimate their exposure and make payments every three months, but the bill is not determined until after the conclusion of each financial year.
The revelation that Rio's pre-payments were refunded has raised the prospect that other companies such as BHP Billiton may have had their pre-payments refunded, too, and comes just a week after the Rudd government downgraded its revenue estimate for the tax over the next four years.
Last week's pre-election financial statement forecast the mining tax would raise $4 billion over the next four years, well below the original prediction of $22.5 billion.
Liberal senator Mathias Cormann said the refund could render last week's budget update out of date. "This casts massive doubt over Labor's economic statement ... because the revenue figures in it are clearly already out of date - again," he said.
News of Rio's mining tax refund came as the company revealed a $US4.2 billion underlying profit for the first six months of 2013.
That result was in line with analyst estimates, but $US1 billion lower than at the same time last year thanks to the same fading commodity prices hampering the mining tax.
The net profit was $US1.7 billion after a small impairment related to a wall slide at a US copper mine, and an accounting charge linked to the fall in the Australian dollar against the US currency.
In a significant corporate development, Rio abandoned its attempt to divest itself of a cluster of Australasian aluminium assets - known as Pacific Aluminium - after more than a year of trying.
Many of the assets, including the Gove Alumina refinery in the Northern Territory, are losing money and attention will now turn to whether some assets need to be closed down.
Rio said it would integrate Pacific Aluminium back into its broader aluminium division, but when asked if the assets were good enough to stay on the company's books longer term, CEO Sam Walsh said: "I would like to see further improvement.
"I think the market was aware that Pacific Aluminium was not going to sell; I'm a realist, I'm a pragmatist, let's get on with life."
The retention of Pacific Aluminium is another sign that Rio is finding it hard to sell assets in a bad market, after the company in June abandoned more than a year of efforts to sell its diamonds business.
There have been rumours that an attempt to sell Rio's small iron ore business in eastern Canada will also soon be abandoned.
Thursday's results gave no definitive answer as to whether Rio would go ahead with plans to spend $US5 billion expanding its Pilbara iron ore business to 360 million tonnes a year. The board will consider that later this year but is under pressure from shareholders to preserve cash.
Rio spent $US7 billion on capital expenditure in the first half and has forecast another $US7 billion in spending for the second half.
"We are expecting that capital will be $US14 billion for this year ... that will continue to allow us to bring the projects forward that are in the hopper," Mr Walsh said.
Shareholders will get an interim dividend of 83.5¢.
Frequently Asked Questions about this Article…
Rio Tinto ultimately paid no mining tax for the first year because pre-payments it made in April were refunded by the Australian tax office after review work showed the company was not liable for the 2013 financial year.
The mining tax requires companies to estimate their exposure and make payments every three months, but the final tax bill is determined only after the end of each financial year — which can lead to refunds if the year‑end calculation shows no liability.
The article says the revelation about Rio Tinto’s refund has raised the prospect that other companies, including BHP Billiton, may also have had their pre-payments refunded, though it does not confirm specific refunds for other firms.
Rio reported an underlying profit of US$4.2 billion for the first six months of 2013, broadly in line with analysts but about US$1 billion lower than a year earlier; net profit was US$1.7 billion after a small impairment from a wall slide at a US copper mine and an accounting charge related to the fall in the Australian dollar against the US dollar.
After more than a year of trying to sell the Australasian aluminium cluster known as Pacific Aluminium, Rio abandoned the divestment because many of the assets were losing money; the company said it will integrate Pacific Aluminium back into its broader aluminium division and may consider further actions, including potential closures, if improvements aren’t made.
There was no definitive decision on the proposed US$5 billion Pilbara iron ore expansion to 360 million tonnes a year — the board will consider it later in the year while under shareholder pressure to preserve cash. Rio spent US$7 billion on capital expenditure in the first half and forecast a further US$7 billion for the second half, expecting total capital of US$14 billion for the year.
The refund came shortly after the government downgraded its mining tax revenue estimate to $4 billion over the next four years (down from an original $22.5 billion), and opposition figures suggested the refund could make recent budget revenue figures out of date and raise doubts about the government’s economic statements.
Yes — the company announced an interim dividend of 83.5¢ for shareholders in the half‑year results reported in the article.
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