Rudd Wants ‘Sensible’ Outcome to Australian Tax Talks
June 22, 2010, 10:43 PM EDT(Updates with comment by Rudd from first paragraph.)
By Marion Rae
June 23 (Bloomberg) -- Australian Prime Minister Kevin Rudd said he’s seeking a “sensible and balanced” settlement with mining companies opposed to his plan for a 40 percent levy on the industry’s “super” profits.
The bottom-line is a “profits-based tax, levied at 40 percent, a tax which applies to existing projects and one which is capable of delivering the revenue to meet the government’s policy priorities,” Rudd told reporters in Canberra today. “What we’re working toward is a sensible and balanced outcome.”
The levy is forecast to provide A$12 billion ($10.4 billion) in the first two years after it takes effect in 2012, according to the government. The plan includes tax breaks for exploration which Rudd says will promote investment and benefit smaller miners who are yet to turn a profit and can’t offset those costs.
Rudd is considering changes to the tax, including allowing a higher rate of return and scrapping the exploration rebate to fund the changes, the Australian Financial Review newspaper reported today, without saying where it got the information. Lower-value resources such as clay, sand, gravel, rock and limestone may be excluded, while iron ore and coal will remain as the largest revenue raisers, the newspaper said.
“Detail, implementation, transition and even generous transition, as I’ve said from day one, that’s what we’re negotiating with the companies and we’ll continue to do so,” Rudd said today when asked about reports of a compromise.
Tax Rates
Australia, the world’s biggest shipper of coal and iron ore, announced the new tax on May 2 as part of an overhaul that includes a phased cut in company tax rates to 28 percent from 30 percent by mid-2014. The government is talking to about 80 resources companies about its plan.
The clash with companies like BHP Billiton Ltd. and Rio Tinto Group centers on the government’s proposal to define a “super” profit as returns above the long-term Australian government bond rate of about 6 percent. The nation’s petroleum resource rent tax, also levied on profits at a rate of 40 percent and in place since 1987, kicks in when returns exceed 11 percent.
BHP and Rio are among companies saying the levy will stall investment in the resources industry.
--With assistance by Gemma Daley in Canberra. Editors: Paul Tighe, John Brinsley
To contact the reporter on this story: Marion Rae in Canberra at mrae3@bloomberg.net
To contact the editor responsible for this story: Iain Wilson at iwilson2@bloomberg.net
