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Tuesday, May 04, 2010 5:24 AM

"Super Tax" Hits Australia; In US, Gold will be an Easy Target; Expatriates Give Up US Citizenship To Avoid Taxes

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Congratulations (of sorts) go to Australia for enacting the highest taxes on mining profits in the world. Please consider BHP, Rio Shares Drop on Australian Mine ‘Super’ Tax

BHP Billiton Ltd. and Rio Tinto Group, led declines in mining stocks in Sydney trading on concern Australia’s plans to impose the world’s heaviest tax regime on resource companies will cut billions from profits.

BHP and Rio fell the most in 3 months after Australia announced the so-called super tax yesterday. The 40 percent tax on resource profits will start from 2012 and raise A$12 billion ($11 billion) in its first two years. BHP, with 51 percent of its assets in Australia, said taxes on its operations there will increase to 57 percent in 2013 from 43 percent now.

Australia, the world’s biggest iron ore and coal exporter, is now the most highly taxed mining nation, reducing its competitiveness, Citigroup Inc. said. The move may reduce BHP’s earnings by 17 percent and Rio’s by 21 percent in 2013, UBS AG said today in a report.

Taxing resources companies to help fund government spending is designed to give Australia’s 20 million population a greater share in a China-fueled boom for iron ore and coal. Prime Minister Kevin Rudd, preparing for an election within a year, said the changes will help the government pay for hospitals, retirement benefits and company tax reductions.
Mergers and Acquisitions Will Stall

Bloomberg reports ‘Super Tax’ May Stall Mining M&A
BHP Billiton Ltd. and Xstrata Plc’s expansion and acquisitions plans may stall on Australia’s plan to increase taxes on mining companies whose profits have surged A$80 billion ($74 billion) in the past decade.

“Any probability of mining takeovers proceeding has lessened,” Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne, including BHP and Rio Tinto Group, the world’s largest and third-biggest miners, said on Bloomberg TV. “It definitely increases the hurdles for prospective buyers in the resources space in Australia.”

“I know from direct involvement we have as a firm there are a number of major transactions on the cusp of being announced that they are going back and rerunning their numbers now,” said Mike Elliot, global mining and metals leader at Ernst & Young in Sydney. “Not necessarily with a view that this has killed any of those deals, but it does change the balance within those deals.”
In US, Gold will be an Easy Target

It will not be long before the US considers doing the same thing to its natural resources industry. Indeed, anything that makes money, especially gold and energy will be easy targets.

For several years running I have been asked at precious metals conferences about the possibility that government will confiscate gold as did FDR. My response has always been "Physical confiscation will never happen again . However, they may tax the hell out of it."

That possibility looks increasingly likely, and the end result is essentially the same.

Giving Up Citizenship to Avoid the Taxman

Inquiring minds are reading More American Expatriates Give Up Citizenship
Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship.

“What we have seen is a substantial change in mentality among the overseas community in the past two years,” said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.”

The Federal Register, the government publication that records such decisions, shows that 502 expatriates gave up their U.S. citizenship or permanent residency status in the last quarter of 2009. That is a tiny portion of the 5.2 million Americans estimated by the State Department to be living abroad.

Still, 502 was the largest quarterly figure in years, more than twice the total for all of 2008, and it looms larger, given how agonizing the decision can be. There were 235 renunciations in 2008 and 743 last year. Waiting periods to meet with consular officers to formalize renunciations have grown.

Stringent new banking regulations — aimed both at curbing tax evasion and, under the Patriot Act, preventing money from flowing to terrorist groups — have inadvertently made it harder for some expats to keep bank accounts in the United States and in some cases abroad.

Some U.S.-based banks have closed expats’ accounts because of difficulty in certifying that the holders still maintain U.S. addresses, as required by a Patriot Act provision.

“It seems the new anti-terrorist rules are having unintended effects,” Daniel Flynn, who lives in Belgium, wrote in a letter quoted by the Americans Abroad Caucus in the U.S. Congress in correspondence with the Treasury Department.

Ed writes...
Hello Mish:

I noted your item today about U.S. citizenship. You may not be aware that there are two different processes:

"giving up" U.S. citizenship

"renouncing" U.S. citizenship

"Giving up" is much simpler. All that is needed is to write out a simple statement that citizenship has already been obtained with another country, and covering a few other similar types of points.

"Renouncing" citizenship requires, as stated in your newsletter, a meeting with U.S. consular officials. The person intending to renounce citizenship must bring along another person as a witness, and maybe also to testify to the sanity of the person intending to renounce U.S. citizenship!

I wonder if the figures quoted in your newsletter cover both the "giving up" process and the "renouncing" process.

I obtained my Canadian citizenship in mid-2007, and gave up my U.S. citizenship at the end of 2007. I should have done it years earlier. In 2006 I got creamed with huge U.S. taxes, and then the Canadian tax people accidentally on purpose forgot to give me the proper foreign tax credits.

Mike "Mish" Shedlock
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