Australian govt wins crucial support for mining tax

Mon Nov 21, 2011 12:54am EST
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By James Grubel

CANBERRA (Reuters) - Australia's government is set to pass laws for its 30 percent mining profits tax later this week after agreeing to lift the starting threshold and promising more scrutiny of coal seam gas projects in a deal to win support from three key independents.

But the changes, which will cost about A$20 million a year in lost government revenue, have upset the Greens, whose support is needed to pass the laws, and done little to allay concerns of small and mid-tier mining companies.

Under the agreement with independent lawmaker Andrew Wilkie, the government will lift the starting profits threshold for the tax from A$50 million to A$75 million, although smaller iron ore miner BC Iron said the changes would give no relief to smaller companies.

"It's like painting that house full of termites" BC Iron Chief Executive Mike Young said. "To put A$75 million into context, at current iron prices, that's our margin on maybe 1.2 million tonnes."

Gillard's government, which holds a one-seat majority with support from one Green and the three independent lawmakers, wants the mining tax passed by the lower House of Representatives by the end of the week.

The government wants the tax on iron ore and coal mine profits, due to start in July 2012, to raise about A$7.7 billion in its first two years, and Treasurer Wayne Swan said the changes meant the biggest miners would pay the most.

"Most of this money will now be paid by the largest miners in this country," Swan told parliament.

A government deal with two other independents, Tony Windsor and Rob Oakeshott, earmarks A$200 million over five years for scientific research into coal seam gas projects, to allow governments to better assess the impact on water and farming.   Continued...