TAX NEWS - June 2010

Resource Tax Talks to Take Months

MELBOURNE --The Australian government signalled a swift end to its increasingly bitter row with mining companies was unlikely Friday, as BHP Billiton Ltd. called for a planned tax on resource profits to be either revamped or scrapped completely.

Treasurer Wayne Swan said the government was open to suggestions about the final design of its proposed 40% tax on "super profits" in Australia's booming resource sector but Prime Minister Kevin Rudd said talks about the new levy could still take months.

The comments appeared to dash hopes that a compromise proposal on the tax was imminent, which led to a rise in mining stocks early Friday.

BHP Chairman Jac Nasser appeared in no mood for compromise, accusin

the government of keeping industry in the dark about its tax plan until it was publicly unveiled last month and saying it was still refusing to acknowledge major flaws in its design.

"Substantive redesign of this proposed tax is necessary and, if this can't address its fundamental failings, it should be abandoned," he said in a letter to shareholders Friday.

Mr. Swan said the design of the tax had not yet been finalized.

"We've said from day one we'll consult with the companies and work towards a final design," he told a conference in Brisbane.

"The first phase was the tax review deliberations; we're now in the second phase which is consultation and debate; soon we'll move to the third phase which finalizes the design."

The government, which trails in opinion polls and faces an election later this year, is undoubtedly keen to neutralize an issue that has dominated Australia's political agenda for weeks but also wants to avoid losing face by appearing to back down in the face of mining industry pressure.

Mr. Rudd said suggestions that the government would unveil a compromise solution on Friday or Saturday was "well wide of the mark", predicting negotiations could stretch on for months.