February 17, 2010 / 2:05 AM / in 10 years

Australia miners demand govt rule out resource tax

CANBERRA, Feb 17 (Reuters) - Australia’s resource industry has urged the government to rule out a new tax on big miners including Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)BLT.L which would make them among the world’s most heavily taxed.

In a submission ahead of the May 11 national budget, the Minerals Council of Australia representing Rio, BHP and Xstrata XTA.L, said official calls for an increase in mining royalties were a “tax grab” threatening resource investment and growth.

Australian media has widely reported that Treasury Chief Ken Henry has proposed a 40 percent mining resource rent tax, as well as tax breaks for the four big banks to help draw foreign investment and recast the country as a regional financial hub.

A new tax on miners as part of an across-the-board reform of the tax system could allow Prime Minister Kevin Rudd to ease the burden in other areas and help woo voters in an election-year. [ID:nSGE61E0GW]

“The minerals industry is not a milch cow for repairing the budget or for other policy objectives such as reforms to state and company taxes, or the social security tax interface,” Council Chief Executive Officer Mitchell Hooke said.

The new resource tax replacing state royalties would be based on the petroleum resource rent tax levied on products, including crude oil and natural gas, mined in Australian waters and adding billions of dollars extra to government coffers.

“Any proposal that mining should be taxed at the same rate as oil and gas would represent a significant tax increase that would make Australian mining projects among the most highly taxed in the world and significantly impact on the competitiveness of Australian projects,” Hooke said.

Rudd last month said the government had not yet decided what recommendations it would adopt from a still-secret report by Henry proposing major tax reforms, which Treasurer Wayne Swan has promised to release before the budget.

Senior government sources have told Reuters the tax report release was unlikely before March, prompting complaints from business groups and Australia’s A$1.2 trillion ($1.082 billion) pension industry that delays are causing investment uncertainty.

ELECTION RISK

With an election expected late this year, wholesale tax changes could pose political difficulties for Rudd, especially if they result in a higher tax impost to cope with the pressure of an ageing population and shrinking workforce.

The tax system netted A$278 billion last year, with company and resource rent tax contributing A$56 billion or 21 percent. Australia’s 30 percent corporate tax rate is the eighth highest in the OECD.

BHP Billiton Managing Director Marius Kloppers last week warned that the resource industry needed to know government rules would not change at random.

Hooke said miners were also concerned about Rudd’s softening of employment laws, an issue which is again shaping as a key battleground ahead of this year’s election.

Workers at Xstrata’s Tahmoor coal mine called a three-day strike on Wednesday, the latest in a series of work stoppages at the colliery and adding to stoppages in Western Australia state. [ID:nSGE61G00E]

The MCA submission also repeated opposition among miners to the government’s plan to introduce carbon trade laws already rejected twice by the upper house Senate and currently before parliament for a third time.

Editing by Jeremy Laurence

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