TAX NEWS - JUNE 2010

Australia Tax: Coalition Leads Rudd as Voters Reject Tax, Poll Shows

Australian Prime Minister Kevin Rudd would lose an election held today as the Liberal-National coalition leads the incumbent Labor Party for the first time in almost four years, according to a Nielsen opinion poll.

Rudd is failing to win support for his proposed 40 percent tax on the "super profits" of resource projects. Australia, the world's biggest shipper of coal and iron ore, announced the new tax on May 2 as part of an overhaul that also includes a phased cut in company tax rates to 28 percent from 30 percent by mid-2014. Rudd has said he won't be intimidated by industry pressure to water down the tax.

"We believe we've got the overall design of this tax right," Rudd told Australian Broadcasting Corp. radio today. "We've got the rate right, we've said we'll consult with industry on the question of detail, on implementation and generous transition arrangements."

The opposition coalition, led by Tony Abbott, leads Rudd 53 percent to 47 percent on a two-party preferred basis in the lead-up to a national ballot due by April, according to the survey published in the Sydney Morning Herald today. Rudd's approval rating has slumped to 41 percent from 60 percent in the past two months, according to the survey of 1,400 people between June 3 and 5. The poll has a margin of error of 2.6 percentage points.

"The gap is widening and that means the government is losing the debate on the mining tax," Nielsen Research Director John Stirton told Sky News today.


Advertising Campaign

A A$38.5 million ($31.4 million) radio, print and television advertising campaign, authorized by the government under powers used in a national emergency, is urging Australians to support the levy as part of an overhaul of the economy. Rival ads, sponsored by the Minerals Council of Australia, warn "everyone" will suffer.

Rudd's slide in the polls began in April when the Labor government shelved carbon-trading plans, a mainstay of his campaign when he won power in November 2007. His support is now being eroded in the resource states of Queensland and Western Australia as he presses ahead with his tax plans.

Key seats in Western Australia and Queensland will be lost by Labor, according to a separate Newspoll commissioned by the mining industry and published in the Australian newspaper today. Some 78 percent of voters in nine marginal seats said the tax should be scrapped or changed, while 13 percent supported an unchanged levy, according to the telephone survey of 1,800 people between May 31 and June 3.


Jobs 'at Risk'

"Up to 500,000 Australian families and individuals depend on mining for their jobs -- these are at risk," the Liberal party warned in a mail drop to Western Australian households last month. "Goodbye strong economy! Goodbye local jobs! Hello higher prices!," the postcards say, each featuring a local Labor lawmaker who must face the voters.

Opinion was more evenly divided in South Australia, home to BHP Billiton Ltd.'s Olympic Dam project where a A$20 billion expansion is under review, with 39 percent against the tax and 32 percent in favor, according to the Newspoll survey.

The tax involves "getting extra revenue from the mining companies on the one hand and using that to bring down everyone else's taxation rates," Rudd said today. "The other reason of course is to ensure that all Australians get a fair share of the resources that they, the Australian people, ultimately own."