Court threats loom as Australia passes mining tax

By Madeleine Coorey ,AFP

SYDNEY — Australian Prime Minister Julia Gillard Tuesday defended a controversial tax on the country’s China-fueled mining boom after lawmakers passed it into law, as she faced down the prospect of a court challenge. The tax has been disputed since it was first announced by then-Prime Minister Kevin Rudd in May 2010, triggering a backlash from the powerful mining industry which contributed to his ouster as leader. The conservative opposition has vowed to repeal the tax if it is elected, with critics charging that it will drive investment overseas and make Australia more reliant than ever on growth in its biggest trading partner China. But Gillard said the government wanted the benefits of the country’s vast resources wealth to go to all Australians, not just “the privileged few.” The tax is due to start on July 1 and is expected to generate AU$11 billion (US$11.7 billion) in its first three years, which the government plans to put towards funding infrastructure, pensions and tax cuts for small businesses. “Australians know how important the mining industry is, but they also know that we can only dig up and sell the resources once,” Gillard said in a statement. “The Minerals Resource Rent Tax (MRRT) will deliver Australians with a fair return on the resources they own 100 percent,” she said. Australia is the world’s biggest exporter of the iron ore and coking coal used in steelmaking, and the second-biggest exporter of thermal coal used in power stations.

Legislation that imposes a 30-percent tax on the extraordinary profits of coal and iron ore miners passed the upper house Senate late Monday by 38 votes to 32, with the government winning the key support of the Greens party. The tax will kick in when a company makes AU$75 million per year in profit, a concession the Greens won to protect smaller miners — it had been planned to start at AU$50 million. The Labor government originally wanted a 40-percent tax on all profits generated by resources firms as the nation enjoys unprecedented demand for its huge mineral deposits, mostly from rapidly industrializing Asia. But this was scrapped in favor of a 30 percent tax only on super-profits from iron ore and coal, after an intense lobbying campaign from the powerful and wealthy mining industry, led by BHP, Rio Tinto and Xstrata. Some miners are still unhappy, with major iron ore player Fortescue Metals Tuesday threatening legal action. Fortescue said it was not opposed to paying its fair share of taxes, but the MRRT had been “drafted by the big miners behind closed doors to minimize their tax exposure at the expense of the rest of the industry.” “As Fortescue has previously advised, the company has engaged senior counsel and will commence legal proceedings after the legislation has been enacted and legal opinion has been finalized,” a company spokesman said. Gillard said she was confident of meeting revenue targets, despite the monies collected from the tax relying on the Australian dollar’s exchange rate, mining volumes and commodity prices. “China is still going to be buying in absolutely record quantities the things that we have to sell out of our resources sector,” she told the Australian Broadcasting Corp. Treasurer Wayne Swan, who recently launched stinging attacks on mining billionaires including Fortescue’s Andrew “Twiggy” Forrest, said the point of the tax was to capture benefits from the rise of Asia. “This is just not a China story. It’s an Asia story across the board,” he told the Australian Broadcasting Corp. “There’s a shift in weight from West to East that’s coming our way.”