TAX NEWS - 2010

Mining Tax: Abbott says Coalition would rescind new mining tax of Australia

Tony Abbott and Joe Hockey have criticised Australia mining tax

Julia Gillard could have a fight on her hands to get the new mining tax approved by the Senate, with the Opposition refusing to support it.

The revamped tax has been hailed as a victory for the Prime Minister, with the Minerals Council describing it as a positive outcome and mining stocks getting a lift from investors.

Ms Gillard confirmed the amendments this morning, slashing the proposed rate from 40 to 30 per cent, saying "we've been stuck on this question as a nation for too long".

Phillip Hudson: Tax revamp a huge win for Gillard

But Opposition Leader Tony Abbott says he will not support it.

"The next election is a referendum on tax," Mr Abbott said.

Mr Abbott said the battlelines had been drawn and the alternatives were sharp and clear.

"Labor supports a great big new tax on mining - the Coalition doesn't," he told reporters. "It's as simple as that."

Labor needed a tax because it had turned a $20 billion budget surplus into a $57 billion deficit, Mr Abbott said.

"The Opposition will oppose the new minerals tax," he said.

"We will oppose it in opposition and we will rescind it in government.

Mr Abbott said the mining industry had got "the best deal from a bad government''.

"The miners were effectively negotiating with a gun at their heads, and that's not a situation they should ever have been put into,'' he said, adding the new deal would still hit the industry hard.

"This is still a tax grab rather than tax reform ... A $12 billion tax grab has been replaced with a $10.5 billion tax grab.''

Mr Abbott also criticised the government for not consulting widely enough.

"It was discussed between the government and three big companies,'' he said.

"There are about 300 other companies that it wasn't discussed with and you shouldn't make any assumptions as to whether they are happy with it.''

Mr Abbott called on the government to release the modelling of both schemes to justify its figures.

"It's difficult to see... how the original tax could raise $12 billion and how the new tax could raise $10.5 billion given the changes.''

Opposition treasury spokesman Joe Hockey said the new tax would deter companies thinking of investing in Australia's resources.

"Not only have they got the most complicated taxation regime in the world, but now they have a new tax that is going to raise at least $10.5 billion dollars that is going to have to be paid,'' he said in Sydney.

The Greens leader Bob Brown said there needs to be scrutiny of the deal.

"In the end, Parliament will decide if this Gillard and mining baron deal stands. Australians will have a say at the next election when they elect a new Parliament, including a new Senate," Senator Brown said.

Click here to read more reaction from political circles

The local stock market, which has taken a pummeling in recent days, reacted positively to the news, with the All Ordinaries Index up 41 points, or just under one per cent, at 10.30am, before settling back to half a per cent ahead at noon.

On the share market today, major mining shares lost their early gains, while smaller companies closed mixed.

Rio Tinto gained 20 cents to $65.30, BHP Billiton lost two cents to $37.09 and Fortescue Metals added eight cents to $4.08.

The Minerals Council of Australia, which had led the assault on the previous version of the tax, said the deal was a positive outcome for the industry and the Australian economy.

Click here to read more reaction from the mining industry

Ms Gillard this morning confirmed speculation that it had scrapped a plan for a 40 per cent resource super-profits tax, replacing it with a two-tiered regime affecting iron ore, coal, oil and gas.

It will be called the minerals resources rent tax, rather than the resource super profits tax.

The Gillard Government negotiated the new rate to resolve a bitter deadlock with the mining sector.

The standoff had been cited by Labor MPs as one of the main reasons for taking the extraordinary step of overthrowing Kevin Rudd in his first term as prime minister last week.

But promised company tax cuts have been scaled back to pay for the deal.

Instead of dropping from 30 to 28 per cent, company tax will now only fall to 29 per cent.

Announcing the plans in Canberra this morning, Ms Gillard said the nation could now move on, with Australians getting a fairer share of mining wealth.

"We have been stuck on this question as a nation for too long,'' she told a press conference.

"Today we are moving forward together.''

The arrangements would deliver better returns for the resources that all Australians owned, and that could only be dug up once, Ms Gillard said.

It will end uncertainty and division, strengthen the economy and deliver sustained investment in infrastructure in mining communities, "maintaining Australia's standing as a competitive and attractive destination for investment," she said.

The deal will also cut the number of affected companies from 2500 to 320, but focusing only on the iron ore and coal industries.

The oil and gas industries will be covered by the existing Petroleum Resources Rent Tax.

Miners will also be able earn profits of about 12 per cent before the tax kicks in.

The changes will cut revenue by $1.5 billion over four years.

Ms Gillard acknowledged the compromise deal would have its critics.

But Ms Gillard said the deal was a breakthrough rather than a backdown.

"I've learned across my life is that you can work best if you get people around a table and get people around a table and have open, frank discussions," she said.

"At the end of the day, you will never please everybody. And we are not suggesting that this package will please everybody.

"But I think what this has proven is the benefit of respectful conversation and frank talking."

The deal does not affect the Government's ability commitment to bringing the Budget back into surplus within three years, she said.

Ms Gillard defended the public servants and government advisers who had worked on the original tax proposal from suggestions they were not working in the "real world''.

"Obviously we need advice from within the bureaucracy, and I believe we've got great people working alongside us as a government.''

The government had got out and talked to people about the tax, Ms Gillard said, adding it was her intention to continue doing that.

The discussions with the mining industry was "hard, frank and respectful'', Ms Gillard said.

"As Prime Minister I've put my stamp on the approach that was taken here,'' she said, adding that she was "not afraid of a difficult conversation''.

Former BHP Billiton chairman Don Argus will chair a policy transition group, Ms Gillard said.

The critical breakthrough came last weekend when Ms Gillard telephoned BHP Billiton chairman Jac Nasser and told him she was prepared to put every aspect of the controversial resources super profits tax on the table.

Previously, Mr Rudd had ruled key parts of the package to be non-negotiable, leading to a heated advertising war.

After attending the funeral of commando Benjamin Chuck in Cairns yesterday, Ms Gillard returned to Canberra about 8pm to approve the deal crafted by Resources Minister Martin Ferguson and Treasurer Wayne Swan.

The two ministers held three days of intensive talks with the heads of the three biggest mining companies, Rio Tinto, BHP Billiton and Xstrata.

Mr Swan said talks had been "comprehensive'' as he confirmed all aspects were being negotiated.

"I don't intend to put any boundaries around those discussions,'' he said.

The deal will further revive the Government's prospects as a federal election aproaches.

On her first day as Prime Minister, Ms Gillard offered an olive branch to the miners by announcing the Government would pull its RSPT advertising.

Mr Swan said Ms Gillard's entry into the debate had been cricial.

"I think it's fair to say that her intervention changed the tone of this debate and has led to this breakthrough," he said.

The deal comes despite repeated statements by Mr Swan and other senior Government figures that the 40 per cent tax rate was not negotiable.

When it announced the tax as the centrepiece of its response to the Henry Tax Review on May 2, the Government said it would start in July 2012 and raise $12 billion in its first two years.

The money would be used to pay for a company tax cut, give small business a $5000 instant tax write-off, boost superannuation, pay for a standard $500 tax deduction to be introduced and fund a 50 per cent tax discount on interest from bank accounts.

Mr Swan warned those promises would only be funded from the mining tax and if the revenue was cut promises would be scaled back.