Australia's PM Says Mining Tax Idea Was Raised In 2008

15th Jun 2010 09:18

CANBERRA (Dow Jones)--Australian Prime Minister Kevin Rudd Tuesday said the country's mining sector shouldn't have been surprised by a planned new tax regime for the resources industry, given it was one of the ideas raised by the chief architect of the tax as far back as 2008. Rudd's comments come more than six weeks into an increasingly heated political debate, and as the prime minister appears to be struggling to cut through a well-funded industry campaign against the tax. The notion that the government has engaged in any long-running consultation was strongly rejected by major mining companies Tuesday. And even some of Rudd's own senior ministers have conceded in recent days that the tax policy should have been subjected to more rigorous scrutiny before being unveiled May 2. Under the planned tax, which would effectively replace state-based mining royalties, profits over the long-term bond rate would be taxed at 40%. Responding to questions from the main conservative Liberal-National opposition, which opposes the tax, Rudd said Tuesday a resource rent tax was one of the options discussed by Treasury Secretary Ken Henry in an August 2008 discussion paper on Australia's future tax system. "That discussion paper raised the inefficiencies of royalties and pointed to a profits-based tax. It says these royalties can discourage high-risk investments," Rudd told Parliament. "It said a resource rent tax does not apply until the firm has earned above normal profits." Mining companies have railed against the tax in an increasingly vocal, and bitter, public campaign, with some mining companies putting projects and investments on hold and executives of some other companies threatening to focus investment in lower taxing countries and describing the levy as a potential sovereign risk. A BHP Billiton Ltd. (BHP.AU) spokeswoman said Tuesday there was "never" details of a 40% resources rent tax that would be applied to existing and new projects and the first the industry had heard of the tax was on May 2. She said the industry was still looking for real consultation with the government on the proposed tax. Those sentiments were echoed by fellow mining giant Rio Tinto Ltd. (RIO.AU). "From the outset of the Henry review, Rio Tinto has wanted to provide constructive input to help deliver tax reform that attracts investment to Australia," a spokesman said. "There was no consultation on the mining tax either before the May 2 announcement or since. We remain keen to engage with the government to get the right outcome for the Australian economy," he said. -By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; [email protected] (END) Dow Jones Newswires June 15, 2010 04:18 ET (08:18 GMT)