TAX NEWS - June 2010

Super Profits Tax: Pressure for partial backdown, as Swan meets miners

Industry experts are predicting ways the Federal Government could water down its stance on the proposed Resources Super Profits Tax against the backdrop of the looming election.

The Treasurer, Wayne Swan, is due to hold more meetings with the mining industry this week, but insists he won't budge from the 40 per cent tax level.

But analyst Stephen Bartrop says it's likely that, in its negotiations with miners, the government will make changes to the way the tax is going to be implemented.

"Despite hearing the rhetoric from the government, there is an expectation that the government will become increasingly desperate to try and negotiate a compromise situation to the RSPT without, sort of, losing face."

Another mining analyst says the mining giant Xstrata might consider pulling out of its huge Mount Isa copper operation in north-west Queensland.

The company has already suspended some projects in that region, and analyst Gavin Wendt says the situation could worsen in light of the proposed resources super profits tax.

He says Xstrata would be weighing up its existing projects against new international ones.

"It's something that I'm sure would be going through Xstrata's minds at the moment, not just Mount Isa but other projects as well," he says.

"It's a similar dilemma or process that most big companies going through, but I guess the catalyst for this is probably the new resource tax."

In a written statement, Xstrata says it is committed to Mount Isa, but the proposed mining tax has the potential to impact the long-term sustainability of Xstrata's north Queensland copper operations.

Mining communities in rural NSW are divided about the Federal Government's mining tax.

The government is running a campaign to convince the public it's a good thing, but many Australians are still struggling to understand how it works.

The mayor of Cobar in western NSW, Lillian Brady, says she's concerned about the effects of the mining tax on her town.

"Cobar is a mining town and besides that the mines are very very complimentary to the town," she says.

"They sponsor. They're always there for us. Big or small, they'll come to the party."