RPT-Australia imposes mining tax after two-year battle

Mon Mar 19, 2012 5:03pm EDT

(Repeats story first published late on Monday. No change to text)

* Tax on profits will affect about 30 companies

* Victory for Prime Minister Gillard's struggling minority government

* Association of smaller miners says tax will discourage investment

* Opposition has said it will repeal tax if it wins power

By James Grubel

CANBERRA, March 19 (Reuters) - Australia's parliament passed laws for a new 30 percent tax on iron ore and coal mine profits on Monday after a bruising two-year battle with mining companies, in a major victory for Prime Minister Julia Gillard and her struggling minority government.

The tax will affect about 30 companies, including global miners BHP Billiton , Rio Tinto and Xstrata, and aims to raise about A$10.6 billion ($11.2 billion) in its first three years.

"This is indeed an historic day for economic reform, and an historic day for a fair go in Australia," Treasurer Wayne Swan told parliament.

The tax, which is being closely watched by other resource-rich countries, is designed to spread the benefits of Australia's resources boom to other sections of the economy by funding a cut in the company tax rate, higher payments into pension funds, and A$6 billion of infrastructure spending.

The bills also include measures to lift gradually compulsory employer payments into worker pension funds from nine percent to 12 percent by mid-2019.

The laws passed through the upper house Senate with support from the Greens, who unsuccessfully tried to increase the tax rate to 40 percent and extend it to gold and uranium miners.

The Association of Mining and Exploration Companies, which represents small and mid-tier miners, condemned the tax.

"The tax is simply unfair to smaller emerging miners, and is so complex that the administrative and compliance burden on industry and government will be extreme," association chief executive Simon Bennison said.

"The introduction of this anti-competitive legislation in Australia will only further push investment capital offshore, and change our reputation as a safe place in which to invest."

OPPOSITION VOW

The government announced the original mining tax in May 2010, sparking an angry reaction from miners who ran an advertising campaign against it.

Opposition to the original 40 percent mining tax played a key role in the ruling Labor Party's June 2010 decision to dump Kevin Rudd as prime minister and replace him with Gillard.

Gillard negotiated the 30 percent mining tax with BHP Billiton, Rio Tinto and Xstrata, but without agreement from Australian miners such as Forestcue Metals Group, Atlas Iron and BC Iron.

Gillard then almost lost the 2010 national elections, but held on to power by one seat by forming a minority government with support from the Greens and two independent members of parliament.

The next election is due in late 2013, but opinion polls show Gillard's government well behind the opposition, which has promised to scrap the tax if it wins office.

But Treasurer Swan, who has run a campaign criticising Australia's biggest mining magnates, has said Australians support the mining tax.

The mining tax policy victory follows parliament's endorsement of a controversial carbon tax, and laws to force global tobacco companies to use plain packages for cigarettes.

(A$=$1.06)

(Editing by Robert Birsel)

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