It is reported that Ms Jullia Gillard Prime Minister of Australia will continue to face fierce political resistance to the government tax plan for the mining industry even after agreeing to concessions with industry captains this week.
Under plans announced recently the government expects to bank USD 10.5 billion from its new arrangements in the next four years down from USD 12 billion and with a tax structure sharply different from the proposal advanced and fought for by Mr Kevin Rudd.
The big miners BHP Billiton, Rio Tinto and Xstrata have signed up to the plan, yet the Opposition Leader, Mr Tony Abbott said the election campaign would still be fought over the proposal to impose heavier taxes on resources firms.
The tax unveiled recently is a departure from the government original proposal which had been pilloried by the industry but favored by Treasury for having an elegant theoretical basis. The new minerals resource rent tax will be levied only on coal and iron ore and limited to projects making USD 50 million a year or more in profit.
Companies mining other minerals will continue to operate under the company tax regime and coal and gas projects will fall under an expanded petroleum resource rent tax which had previously been limited to offshore projects.
Analysts said the government will drop a USD 1.1 billion rebate for exploration costs and no longer offer to assume 40% of project losses. The rate drops from 40% to 30% but in practice this will be 22.5% because the tax does not cover all profits. The point where it starts doubles.
The concessions shear USD 1.5 billion from the budget in the next four years forcing the government to renege on a promise to cut the company tax rate to 28%. It will fall only to 29% in 2013-14. Small businesses will receive the tax cut a year earlier and planned measures to increase superannuation will also go ahead.
Ms Julia Gillard said ''There will be a negotiated profit based tax regime but there will be no resource super profits tax. We know that some parts of the mining industry will still have their criticisms but I believe we've struck the right balance.''
The concessions won the support of the Minerals Council of Australia which led the campaign against the original plan. Some economists however said it was difficult to estimate how generous the government had been with its concessions.
Mr Paul Frijters an economist at the University of Queensland said ''I wouldn't be surprised if the concessions turn out to be more than USD 1.5 billion.”
To continue work on the tax, Mr Don Argus the former BHP chairman will join Martin Ferguson Minister for Resources.
If re-elected, the government would probably need the support of the Coalition or the Greens to pass legislation for the planned tax. The Greens said they would propose changes, Mr Abbott said the tax remained a grab.
He said that ''The Coalition is against great big new taxes. We will oppose it in opposition and we would rescind it in government.''
The Association of Mining and Exploration Companies, representing smaller mining businesses is hostile to how the tax was put together.
(Sourced from http://www.smh.com.au)
