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Australia Digs in Heels on Mining Tax
Madeleine Coorey | May 23, 2010

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Sydney. Australia signaled on Sunday that it was open to compromise on the controversial plan to tax the “super profits” of the Asian-driven mining boom, but insisted the 40 percent headline rate would remain.

Resource companies have launched a fierce campaign against the tax, arguing that it is damaging to investment and jobs and will cut their ability to compete with foreign miners.

But the government insists it is a fair measure that will allow it to lower company tax and fund other measures, thereby ensuring the benefits of the mining boom are spread more evenly.

Resources Minister Martin Ferguson said the government wanted to consult with the nation’s most valuable export industry on the tax because there were technical issues to resolve.

“The headline tax rate is correct,” he said. “But there is room for compromise, as I’ve said on a number of occasions, with respect to how you apply the proposed tax regime.”

Ferguson said the government would await a report from its consultation committee on whether the point at which a “super profit” was reached — currently deemed to be when a company’s profits pass 6 percent of current earnings after rebates for some expenses are deducted — would change.

“I think it’s time the mining companies of Australia got used to the idea that they need to return a fairer share to all Australians, for the resource which all Australians own,” Prime Minister Kevin Rudd said on Sunday.

Deputy Prime Minister Julia Gillard also stepped up the war of words with the miners, saying that multinational resource giants such as BHP Billiton and Rio Tinto effectively paid a tax rate of only about 13 percent while wholly domestic firms paid about 17 percent once the concessions were deducted from the current 30 percent company tax rate.

“This is not a fair share and that’s why we’re moving to introduce the resources super-profits tax,” Gillard said.

But the industry disputes this claim, and the Minerals Council of Australia says mining firms will have the highest tax rate in the world at 58 percent once the new levy is combined with current state-based royalty payments.

West Australian mining magnate Andrew Forrest, whose iron ore miner Fortescue Metals last week placed two multibillion-dollar iron ore projects on hold over the tax, said global financiers would now cast a wary eye on Australia.

“They are fleeing Australia unfortunately,” he said. “You can see that in the share prices of all Australian asset resource companies. We are absolutely getting hammered.”



Agence France-Presse