Australia Minister: Tax To Ensure Fair Price For Non-Renewable Resources

21st Jun 2010 00:55

CANBERRA (Dow Jones)--The Australian government's planned new 40% tax on mining profits will ensure a fairer distribution of the proceeds of a mining boom than current state-based royalties schemes, Assistant Treasurer Nick Sherry said Tuesday. The comments come as BHP Billiton Ltd. (BHP) and Rio Tinto Ltd. (RTP) said Monday they have agreed to pay higher state royalties on their iron ore operations in the Pilbara region of Western Australia. The miners may use the change to bolster their campaign against the federal government's planned resource super profits tax, as they continue to argue they are already paying their fair share of taxes and royalties. "Australia's non-renewable resources are expected to continue to command high prices driven by increased demand, particularly from China and India," Sherry told a Committee for Economic Development of Australia conference. "The current method of charging, largely through royalties, has meant the amounts miners have paid for resources have not kept pace with the prices of these resources," he said. Because royalties are charged as an amount per quantity extracted, or a percentage of revenue received, they are a high proportion of lower-value deposits and a small proportion of high-value deposits, Sherry said. "They discourage miners from developing viable but lower-value mines," he said. Under the agreement BHP and Rio Tinto reached with Western Australia's state government Monday, royalty rates will rise to 5.625% of sales of iron-ore fines from 3.75%, while the rate for lumps will be set at 7.5%. Analysts say the change in royalty rates won't have a major impact on the miners' earnings once strong iron ore prices are factored in. -By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; [email protected] (END) Dow Jones Newswires June 21, 2010 19:55 ET (23:55 GMT)