UPDATE: Australia's Rudd: Mining Profit Tax Rate Is Right

9th Jun 2010 09:57

(Adds comment from industry body, mining executive) By Stephen Bell Special to DOW JONES NEWSWIRES PERTH (Dow Jones)--Australian Prime Minister Kevin Rudd said Wednesday that he is open to more discussions with miners on the country's proposed resource super profits tax, but insisted the 40% rate is the correct level. "We believe that we have the rate of this tax right," Rudd told the Perth Press Club. But the government will discuss "detail, implementation and generous transition arrangements" for the tax, he said. Mining companies including Anglo-Australian giants BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have railed at the planned tax, saying it will make Australia one of the highest-taxing countries in the world for miners and could hurt the viability of future projects. But the government insists the tax will garner Australians a fairer share of the windfalls of the next mining boom, and has said the plan won't harm investment decisions and accused the miners of misleading the public. The plan in its current form defines super profits as profits larger than the return on long-term Australian government bonds. Talks with miners have been ongoing for three or four weeks and will continue, Rudd said, adding the government won't set a timeframe for concluding them. In the face of heavy criticism from big miners, Rudd met with BHP Billiton Chief Executive Marius Kloppers earlier this week to discuss the tax. "We had a cordial and frank discussion, and I'm sure we'll continue to do that in the future," Rudd said. Rudd said he has received an interim report from the government's consultation panel, which has taken submissions from more than 80 companies. The Prime Minister plans to meet with other mining executives in resource-rich Western Australia state, which accounts for a significant proportion of Australia's mineral and petroleum exports. The meetings will include Fortescue Metals Group Ltd. (FMG.AU) CEO Andrew Forrest, a prominent critic of the tax, he said. Forrest attended Rudd's speech and, during a question to the Prime Minister, said that "Fortescue Metals Group wouldn't be here today if this tax was imposed in 2003 (to) 2004," when the company was raising money for its Pilbara iron-ore venture. A major industry lobby group said earlier Wednesday that uncertainty about the levy is creating sovereign risk concerns in Australia and will weaken the economy. There is "emerging uneasiness, at least within business circles, of increasing sovereign risk of doing business in Australia," Minerals Council of Australia CEO Mitch Hooke told a conference in Melbourne. Imposing the new tax would damage the industry and cause projects to be cancelled or delayed, he said. "The government's proposed tax will weaken the Australian minerals industry, and if you weaken mining you weaken the Australian economy." Hooke said the government has been misrepresenting the amount of tax paid by the mining industry and that taxes and royalties over the past decade have totaled A$80 billion, not the A$9 billion the government has claimed. Rudd rejected criticisms that the tax has spooked investors since its unveiling May 2, arguing that Australian mining shares have performed better than non-mining shares in the recent market downturn. He added that shares in diversified miners BHP Billiton and Rio Tinto, which have substantial assets in Australia, have outperformed some of their competitors despite the tax debate. "Their stocks--BHP's and Rio's--were outperforming Vale's," Rudd said, referring to Brazil-based iron-ore giant Vale SA (VALE). "There is no debate about an RSPT or a profits-based regime in Brazil." The government wants to use some of the revenues from the tax to build new infrastructure, particularly in the mining states of Western Australia and Queensland. It plans a A$6 billion regional infrastructure fund, which will include A$5.6 billion from the RSPT, commencing in the financial year ending June 30, 2013. The other A$400 million will be made available from 2010-2011, Rudd said. -By Stephen Bell, contributing to Dow Jones Newswires; 61-8-9244-4243; [email protected] (Alex Wilson in Melbourne contributed to this article) (END) Dow Jones Newswires June 09, 2010 04:57 ET (08:57 GMT)