World Business

Aussie miners, govt talk up possible tax deal

(Agencies)
Updated: 2010-06-02 11:43

CANBERRA: The Australian government and miners talked on Wednesday of a possible compromise deal over government's planned mining tax, with both sides looking to tone down a row that has hurt local markets and unnerved investors.

A captain of Australia's mining industry offered the first olive branch, telling a conference that miners and Canberra could resolve their bitter dispute over the proposed 40 percent tax on windfall mining profits.

"Our differences are not insurmountable," said Ian Smith, chief of Newcrest Mining Ltd, Australia's biggest gold miner, and chairman of the mining industry's main lobby group.

His remarks were echoed by Resources Minister Martin Ferguson, who told the same mining summit that he was confident the two sides could reach an agreement.

"The government wants to continue to work with you in a constructive manner," Ferguson said. "We are looking at a way to address your concerns, for example through generous transition arrangements."

The two speeches marked a departure from the emotional and unyielding rhetoric from both sides since the government announced the tax early last month on the grounds it was not getting its fair share from the commodities trade.

The war of words, which included miners' threats to pull billions of dollars in investment and government accusations of a scare campaign, have unnerved foreign investors, helping to drag down both the local currency and share market.

The Australian dollar has lost 10 percent in a month, mainly due to concerns about the global fallout from Europe's debt crisis but it has also been hurt by concerns over the proposed new tax, which is scheduled to be introduced in mid-2012.

Forty percent rate not up for negotiation: government

Only on Tuesday, Prime Minister Kevin Rudd described the miners' threats of pulling investment as "balderdash" and "bunkum" and vowed to go ahead with the new tax.

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Ferguson repeated Rudd's line on Wednesday that the headline tax rate of 40 percent was not up for negotiation, but stressed the government would offer generous concessions in negotiating some details of the tax known as transitional arrangements.

These yet-to-be-finalized arrangements include the treatment of existing mines which, though subject to the tax along with new projects, could receive big offsetting tax breaks that would reduce the real effective tax rate to below 40 percent.

Newcrest's Smith, chairman of the Minerals Council of Australia, which is leading tax negotiations with the government, said the two sides' differences could still be bridged.

"We are currently a long way apart. We are willing to sit down and engage constructively with the government, but all key designed elements must be on the table. We have a responsibility and determination to get this tax right," he said.