Global Biz

Australia says door open on mining 'super tax'

(Agencies)
Updated: 2010-05-24 09:22

SYDNEY – Australia signalled Sunday it is open to compromise on the controversial plan to tax the "super profits" of the mining boom but insisted the 40 percent headline rate will stay.

A coal dredger tears into the face of the Loy Yang Open Cut coal mine in Latrobe Valley near Melbourne. [Agencies]

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

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

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," Ferguson 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 six percent of current earnings after rebates for some expenses are deducted -- would change.

"I am not prepared to suggest that there is any movement but we will wait the outcome of those discussions," the minister told Network Ten's "Meet The Press" programme.

"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 Sunday.

Deputy Prime Minister Julia Gillard also stepped up the war of words with the miners, saying that multinational resources giants such as BHP Billiton and Rio Tinto effectively paid a tax rate of only about 13 percent.

Wholly domestic firms paid about 17 percent once the concessions were deducted from the current 30 percent company tax rate, she said.

"This is not a fair share and that's why we're moving to introduce the resources super-profits tax," Gillard told the Nine Network.

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 "Twiggy" Forrest said the tax was unfairly punishing companies with Australian resource assets.

Forrest, whose iron ore miner Fortescue Metals last week placed two multi-billion-dollar iron ore projects on hold over the tax, said global financiers now cast a wary eye on Australia.

"They are fleeing Australia unfortunately," he told ABC Television. "You can see that in the share prices of all Australian asset resource companies. We are absolutely getting hammered."

The magnate, who has forged a friendship with the prime minister through his work in raising indigenous employment, said the mining industry had saved Australia from the worst of the global financial crisis.

But he said the proposed tax would stop it from being able to do this in the future.

The mining sector is the country's most important industry, which helped the economy outrun the global downturn and accounted for 44.8 percent of total exports in 2008-2009.