TAX NEWS - JUNE 2010

Australia Tax: Mining tax hits ALP in marginals

The Rudd government's handling of the proposed $12 billion mining tax is so badly regarded among Labor voters in key marginal seats it could cost the ALP enough seats just in the resources states of Queensland and Western Australia to lose the election.

As Kevin Rudd faces calls from leading business figures, the mining industry and state premiers to revamp or drop the tax, 78 per cent of voters in crucial marginal seats agree the tax should be made more acceptable to the mining industry or dropped. Only 13 per cent believe the tax should be introduced without changes. The level of support among Labor voters for changing or dropping the tax is only slightly lower at 71 per cent and much higher among Coalition voters at 91 per cent.

According to a Newspoll survey commissioned by the mining industry, of 1800 voters in the Labor marginal seats of Dawson, Flynn and Longman in Queensland, Wakefield, Hindmarsh and Kingston in South Australia, and Perth, Brand and Hasluck in WA, 48 per cent of those polled were against the new tax and 28 per cent supported it.

The poll, taken between Monday and Thursday last week, comes as another major Queensland mine development is in doubt.

The Australian understands that Perth-based FMR Investments last week put on hold its plans to reopen the Eloise copper mine near Cloncurry, 1800km northwest of Brisbane. Sources close to FMR said the board shelved plans to bring back the Eloise mine and mill after crunching the numbers on the impact of the proposed 40 per cent tax.

The poll found one in four Labor voters - 26 per cent - in the surveyed seats who supported the ALP at the 2007 election and delivered victory to the Prime Minister, say they are "less likely to vote for Labor" at the election.

If even half of those voters shifted to the Coalition at the election, which is expected by October, Labor would lose the 10 seats it needs to hold government - at least eight marginal seats in Queensland and three in WA.

Mr Rudd, Julia Gillard and Wayne Swan are all arguing the mining companies do not pay a fair share of tax and are hoping to swing public support behind the tax, which is universally opposed by the miners and faces calls from some of the government's key advisers for it to be changed.

Voters in the seats surveyed are strongly against the proposed resource super-profits tax.

More believe the tax will make them worse off financially and overwhelmingly want the federal government to either negotiate a tax "more acceptable to the mining industry" or to drop the tax.

One in three people who said they voted Labor at the last election - 33 per cent - said they were against the tax while 42 per cent supported it.

The reaction against the tax was strongest in WA, the home of the resources boom, where Liberal Premier Colin Barnett rejected the proposal from the first day of its announcement on May 2, followed by Queensland, where Labor Premier Anna Bligh has called for negotiations to start and changes to be made.

A Galaxy poll in Brisbane's Courier-Mail on Saturday showed Labor behind in Queensland on a two-party-preferred basis of 48 per cent to the Coalition's 52 per cent and found a majority of voters in Queensland were against the tax.

In both WA and Queensland, mining companies have announced the shelving or suspension of projects worth hundreds of millions of dollars; and Xstrata's suspension last week of $600 million in expansion for copper and coal projects cost 60 jobs and threatens 3250 future positions.

In South Australia, where Labor Premier Mike Rann has warned that four Labor seats could be lost because of the threat to BHP Billiton's $20 billion expansion of its Olympic Dam copper and uranium mine, voters were more evenly divided with 39 per cent against the tax and 32 per cent in favour.

The pattern was the same when people were asked if they thought the tax was good or bad for the economy. A total of 45 per cent said it was bad and 31 per cent said it was good. But West Australians said bad by a ratio of two to one, 52 per cent to 27 per cent; in Queensland it was 44 per cent to 30 per cent and; in South Australia it was split 37 per cent to 36 per cent. But when asked if the federal government should introduce the tax without changes or whether it should negotiate "a tax more acceptable to the mining industry" or not introduce a resources super-profits tax at all, 13 per cent supported the tax, 57 per cent said it should be changed and 21 per cent said it should not go ahead.

The ratio of support was basically the same across all demographic groups, all states surveyed and regardless of political sympathy.

In Queensland, those for change or against the tax was 76 per cent; in South Australia it was 76 per cent and in Western Australia it was 82 per cent. Labor voters overall were those most strongly in support of the tax at 20 per cent, but 59 per cent wanted it changed and 12 per cent were against it.

When asked if the new tax would make them better off or worse off financially, 37 per cent said they would be personally worse off and 15 per cent said better off, but the disparity was higher in Queensland, 40 to 13 per cent, and in Western Australia, 43 to 12 per cent.

People who said they voted Labor at the last election gave the highest level of support to the idea of being better off, at 22 per cent, but 30 per cent still said they would be worse off.

Part of the political problem the government faces is that there is almost complete support for the idea that the mining industry is important to the Australian economy, with 97 to 99 per cent of all respondents saying it was important, including 99 per cent of Labor voters. The latest Newspoll survey shows a worsening position for the government despite its $38 million advertising campaign to counter the mining industry's advertising campaign against the tax.