TAX NEWS - JUNE 2010

Australia Tax: Australia Will Go Ahead With Resource Tax, Swan Says

by Marion Rae, 01 June 2010 -- Australia, the world's biggest shipper of coal and iron ore, signaled it will press ahead with its mining profits tax without making significant changes after holding initial talks with producers last month.

"The government is absolutely determined to proceed with the tax within the framework that I outlined on May 2," Treasurer Wayne Swan told Australian Broadcasting Corp. radio today. "There is a very strong case for them to pay more."

BHP Billiton Ltd., the biggest mining company, and Rio Tinto Group are leading a campaign to pressure the government to water down the planned 40 percent tax. Prime Minister Kevin Rudd is failing to win over voters, with 41 percent opposed to the tax and 36 percent in favor, a Newspoll survey published today in the Australian newspaper shows.

Support for the Greens rose 4 percentage points to a record 16 percent from two weeks earlier as the major parties battle over the tax, according to the telephone survey of 1,149 people between May 28 and 30. Both Labor and the opposition Liberal-National coalition slipped 2 percentage points in their primary vote to 35 and 41 percent, the survey showed. Prime Minister Kevin Rudd's Labor party leads Tony Abbott's coalition 51 to 49 on a two-party preferred basis, after being tied two weeks earlier.

"The election is wide open," Malcolm MacKerras, visiting fellow in political science at the University of New South Wales, said in a phone interview from Canberra today. "Even the slightest swing can create a landslide either way."


Australians Confused

"Public opinion is very fluid, people are confused about the tax," said Mackerras, who expects the election to be called in August and held in October. "They tend to think the mining industry saved the economy from recession."

Treasury Executive Director David Parker, head of the consultation panel in talks with the resource industry, handed his first report to Swan on May 28, completing the initial phase of 18 months of negotiations. The tax is scheduled to be introduced in 2012.

The panel "is considering all of the concerns identified throughout those discussions," Parker told the Institute of Chartered Accountants in Australia forum in Melbourne on May 26. Fortescue Metals Group Ltd., Australia's third-largest iron ore exporter, said last week the government was unwilling to compromise on the tax.

"It's just naive if anybody thinks that some of the biggest companies in the world, some of the biggest mining companies in this country, are simply going to lie down and agree to pay a bit more tax," Swan said today.

Rudd and Swan say the industry is spending some A$100 million ($84 million) to fight the tax. A A$38.5 million radio, print and television advertising campaign, authorized by the government under powers used in a national emergency, began on May 26 to urge Australians to support the tax as part of an overhaul of the economy.