2nd UPDATE: ICMM: Miners Must Evaluate Ways To Soften Tax

28th Jun 2010 17:14

(Adds quotes and details.) By Rhiannon Hoyle Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Mining companies need to look at what they can bring to the table if they want to see Australia's planned super-profits tax softened, the president of the International Council on Mining and Metals said Monday. In an interview with Dow Jones Newswires, Anthony Hodge also said that negotiations on the proposed new regime must be held as quickly as possible to end the current uncertainty for both miners and the local communities. The government has been in a bitter standoff with mining companies since May, when plans for the Resource Super Profits Tax were announced. It is one of the issues that eroded support for former prime minister Kevin Rudd, who, having rivaled Bob Hawke as Australia's most popular prime minister a year ago, was Thursday dumped by the ruling Labor party in favor of former deputy PM Julia Gillard. Miners are furious they weren't consulted before the new tax plans were announced and factored into future government revenue, and Hodge said a genuine discussion on the proposed tax is "well overdue." "I think the key to an effective conversation here is that each of the parties bring what they can to the table," Hodge said. The tax, which is due to be introduced from July 2012, would be levied at a rate of 40% on all profits from mining projects above a rate of return of about 6%. In its budget papers released last month, the government estimated it would raise 3 billion Australian dollars ($2.62 billion) from the tax in 2012-13 and A$9 billion the following year. Gillard has already made attempts to ease miners' concerns. At her first press conference, she promised genuine negotiations and offered an open door to industry, which has been welcomed as a positive step. But Hodge insisted it is "incredibly important" that negotiations are convened at the earliest possible opportunity, adding that further uncertainty will be negative for companies that are trying to work out their investment plans, as well as for the local communities. "This issue is not trivial, so we can't rush our approach--there needs to be some profound thinking and we need to do the right homework," he said. "But it does have to happen sooner rather than later." Key sticking points have included the 40% rate of the tax and its retrospectivity, the latter of which miners are expected to continue to fiercely oppose. Miners are expected to be skeptical of significant change, though, with Treasurer Wayne Swan, an architect and chief promoter of the tax, not only keeping his position but being promoted to deputy prime minister. Concerns also remain around how the Australian government will meet its commitment to bring the budget into surplus in 2013 without the super-tax. Hodge said that while he doesn't oppose a shift towards profits-based taxation, it is important any impending talks between miners and the government include potential commitments to sustainable development and social contributions, rather than simply focusing on taxation. "It's easy to talk about revenue--about the cost in dollars--and count taxes, but I think the mining industry has a lot to contribute and I don't think we have ever really looked at that fully," he said. Community contributions could include the provision of fundamental services, such as education, housing and transport, Hodge said. "It will vary, but these are the discussions we need to be having," he said. Hodge has been president of the ICMM--which represents mining and metals companies, including BHP Biliton PLC (BHP), Rio Tinto PLC (RTP) and Xstrata PLC (XTA.LN), and aims to advance their commitment to sustainable development--since October 2008. -By Rhiannon Hoyle, Dow Jones Newswires; +44 (0)20 7842 9405; [email protected] (END) Dow Jones Newswires June 28, 2010 12:14 ET (16:14 GMT)