UPDATE 1-Australia puts miners under tax microscope

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MELBOURNE, Aug 6 (Reuters) - Australia signalled on Wednesday possible changes to taxation of the mining industry, its biggest export earner, as it launched a review of the entire tax system.

Treasurer Wayne Swan, in releasing a discussion paper on taxation, said the review would be wide-ranging and set the scene for an overhaul of the tax system from 2010.

He declined to comment on possible changes, but the 343-page paper noted taxation of the mining sector, which generates around A$100 billion in annual exports, would come under scrutiny.

"It will not be my task in this process as we go through it to be ruling things in and to be ruling things out," Swan told reporters.

Mining industry taxes have surfaced as an issue after almost a decade of surging metals and coal prices, swelling the coffers of Anglo-Australian giants BHP Billiton (BHP.AX)(BLT.L) and Rio Tinto (RIO.AX)(RIO.L) and creating huge new firms like iron ore miner Fortescue Metals Group (FMG.AX) in just a few years.

The paper noted that mining profits had increased more than five-fold in the five years to fiscal 2006/07, outpacing the growth in tax revenues over the same period.

"The revenue from resource charges has also increased significantly over this period, though not as fast as operating profits," it noted.

The Australian Financial Review reported recently that the centre-left government might adopt a new tax regime for miners whereby they would pay a profit-related tax instead of the more rigid set of royalties currently levied by state governments.

The discussion paper did not telegraph possible changes to the resources-tax regime but highlighted differing tax regimes in other resource-rich countries such as Norway, Canada and Russia.

It noted that Norway applied a 50 percent special tax on top of regular corporate tax and that Russia applied taxes that were linked to commodity prices.

The Australian review will cover all areas of tax but will not tinker with the 10 percent Goods and Services Tax, a political minefield because of its impact on basic living costs.

Swan said the review, headed by Treasury Secretary Ken Henry, aims to harmonise taxes to make them fairer and simpler.

Henry's review will report its recommendations to the government by the end of 2009, putting major tax reform on the agenda for Australia's next national elections, due by late 2010.

The paper said Australians paid at least 125 different taxes, with 99 levied by the national government, 25 by the six state governments and one by local councils.

Based on figures from 2006/07, the paper said 90 percent of national and state tax revenue came from just 10 taxes. The national government collected A$262.5 billion ($243 billion) in tax in 2006-07, while states collected A$48.9 billion.