TAX NEWS - June 2010

Australia Tax: Federal government remains firm on 40% tax

PERTH -- Resources and Energy Minister Martin Ferguson on Wednesday dashed any hopes of differing tax rates for commodities when he said that the headline rate of 40% would remain across the board.

"I made it very clear to caucus we're not talking about different tax rates. As I said to the Parliament yesterday, there will be a profits-based tax system - that's what industry wanted - and there will be a headline rate of 40%," Ferguson told the Australian Broadcasting Corporation (ABC).

Ferguson noted "transitional arrangements" would be made with companies to enable the federal government to achieve its objectives, while also maintaining a strong investment pipeline in Australia.

Treasurer Wayne Swan also on Wednesday confirmed that the federal government was remaining steadfast in its demand for a 40% tax on the resource industry.

"What we'll do is what we said we'd do from day one. We'd take on board what industry had to say. We said that our bottom line was a 40% rate- that is the bottom line. We said there would be generous transitional provisions, and we said we'd discuss the detail with the industry, and that's precisely what we're doing."

The federal government's proposed super profit tax has met with heavy criticism since its announcement earlier this year.

Resource companies have blasted Prime Minister Kevin Rudd's decision to impose a 40% levy on resource profits, saying that the tax would negatively affect Australia's global competitiveness, and would dissuade investors from the Australian resources sector.

Several of the miners, including diversified giants BHP Billiton and Rio Tinto have called on Rudd to scrap the proposed tax.

Besides the 40% levy on resource profits, miners were also dissatisfied that the proposed tax would apply to both existing and new projects, and did not differentiate between minerals which generated different rates of profit.