TAX NEWS - June 2010
Australian PM, BHP knock down quick mine tax deal
Media reports that compromise close on tax
More than $20 billion of new resource investment in Australia has already been shelved by global miners due to the tax, expected in 2012, and Rudd is losing voter support over the tax ahead of elections expected in October.
"I think we have got weeks and probably months of consultations yet with the major mining companies," Rudd told Australian television, responding to media reports he was close to a compromise.
But BHP Billiton on Friday declared its opposition to a rumoured overhaul of the tax, saying that such a compromise would fail to overcome fundamental flaws.
In Sydney trading on Friday, top mining shares were firm although off their best levels with BHP Billiton up 2 percent and Rio Tinto rising 1.4 percent, also helped by firm metal prices.
There is widespread speculation Canberra will water down its planned 40 percent mine-profits tax by remodelling it along the lines of an existing tax on the offshore oil-and-gas industry.
BHP Billiton Chairman Jac Nasser rejected such a move. "As I write, there is speculation that the (Petroleum Resource Rent Tax) is a solution. It isn't," he said in a letter to shareholders released to the Australian stock market.
GREENS MAY HAVE KEY ROLE
Cracks are appearing in the government over the tax, say local media, with pressure on Rudd to reach an agreement with miners so that the government can focus on "bread and butter" issues, like health, in the lead up to the election.
Rudd held talks with BHP Billiton chief executive Marius Kloppers and Fortescue Metals Group's Andrew Forrest this week, and is due to hold more discussions in the mining state of Queensland on Friday.
The prime minister announced on Friday A$2 billion ($1.70 billion) in infrastructure spending in Queensland, bringing to A$4 billion spending aimed at placating opposition to his tax.
Kloppers told the Sydney Morning Herald newspaper he could see no end to the dispute over the "super profits" tax, which miners warn will damage an industry which helped Australia avoid recession during the global financial crisis.
"I'm always hopeful that sense prevails. I have not seen a path this time how sense is going to prevail as of yet, but I remain hopeful," Kloppers said.
Melbourne's Herald-Sun newspaper said the government could announce changes within days, and might lift the threshold where the tax kicks in from around 6 percent to above 10 percent, and could scrap the 40 percent underwriting of losses in return.
The paper said the changes would go some way to meeting the general objections of the mining industry, and would be aimed at helping coal seam gas projects in the key battlefield state of Queensland, just months before general elections.
If this was the deal eventually struck then Rudd's mining tax could gain support from influential Green senators, who may be kingmakers in the next parliament.
"Certainly getting rid of the 40 percent guarantee is a good move. Even the miners don't want that. So that is one of the ideas that the Greens would be supporting," Greens leader Bob Brown told Australian radio.
But Brown said the Greens did not support the higher threshold for the new tax.
"That means billions of dollars, which these big corporations ought to be sharing with the nation, are going to flow through to the shareholders, and that includes billions of dollars flowing out of the country," he said. "We'd look very critically at any move in that direction by the government."
The government defends the tax, saying it will not stall investment and will give Australian workers a fairer share of returns in the booming resources sector.
But Rudd has failed to win public support for the tax and the battle has contributed to a decline in the government's popularity down.
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