Did the Australian Government play a role in bringing down another nation’s tax on mining profits?
Following concerns raised by Mongolian Greens, Bob asked questions to the Minister for Foreign Affairs about what representations had Australia made to Mongolia regarding mining and the taxation of mining? The Minister provided the following answer in Hansard:
“The current Australian Government has made representations to the Mongolian Government that a stable regulatory environment is essential to attract foreign investment and would be beneficial to Mongolia’s economic development. Such representations have been made, for example, during visits to Mongolia by Australia’s non-resident Ambassador and in meetings with Mongolia’s Ambassador to Australia.
In a meeting held on 22 July 2009 between the Hon Stephen Smith MP, Minister for Foreign Affairs, and Mr Damdin Tsogtbaatar, State Secretary, Ministry of Foreign Affairs and Trade, Government of Mongolia, Mr Smith said Australia would like to see an investment agreement for the Oyu Tolgoi mine progressed by the Mongolian parliament.”
Why was Australia’s Minister for Foreign Affairs so interested in this particular mine in being progressed?
The Oyu Tolgoi mine is located in the South Gobi region just north of the Chinese-Mongolian border. It is owned by Rio Tinto, Ivanhoe Mines as well as the Mongolian Government. Prior to proceeding with the development, Rio Tinto and Ivanhoe mines were lobbying intensely to remove the windfall profit tax. The tax had been introduced in 2006 on copper and gold amid a mining boom that saw metals prices hitting record highs.
In August 2009 the Mongolian Government cancelled the windfall profits tax clearing the way for a final investment agreement for the $US3 billion Oyu Tolgoi copper-gold project.
The question that remains unanswered is whether this was the outcome that the Foreign Minister had been hoping for when he spoke to the Mongolian Ministry in July, just one month before the tax was cancelled?
The Questions on Notice also revealed that Australia provides aid support for mining in this part of Mongolia.
In 2008 AusAID provided $100,000 to the World Bank to assist development of an Infrastructure Strategy for Southern Mongolia (where the Oyu Tolgoi project is located). Supporting the development of this strategy, a delegation including 11 senior Mongolian Government officials, four private sector officials and three World Bank representatives undertook a study tour to Australia in November 2008, focused on mining infrastructure in Newcastle, the Hunter Valley and Western Australia. In 2008-09, Australia provided $500,000 to enable the start-up and capacity building of an independent mining sector policy think tank in Mongolia.
Link to an article in The Australian newspaper about this story