Kevin Rudd to backflip on mining tax rate

Energy Matters0


BHP Billiton chief executive Marius Kloppers declared last night that any thought the petroleum tax would work for minerals was “naive” and demonstrated “a lack of knowledge as to how investments are made”.

“Most importantly, we must understand that for each mineral we are competing against other investment destinations, and each set of minerals has a different set of competitors and those competitors set the price,” Mr Kloppers told The Australian.

And Xstrata chief executive Mick Davis said from South Africa: “The government needs to do what it should have done all along and enter into full and open consultations with the industry where every aspect of the super tax is open for debate. Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia.

“The government should stop negotiating with itself and start consulting with the industry.”

Rio Tinto chairman Jan du Plessis told the company’s shareholders that Australia’s reputation had already been damaged by the super-profits tax proposal.

“We are concerned that the proposed resources super tax will erode Australia’s competitiveness, severely curtail investment and limit jobs growth,” Mr du Plessis said yesterday. He said that some of the government’s arguments for the tax and some of the statistics that had been produced to support them “could only be described as scandalous, totally scandalous”.

Wayne Swan continued his criticisms of the mining companies yesterday, telling parliament they were still paying only 17c in the dollar in tax compared with the “headline rate” of 30 per cent. The Treasurer vowed to keep the 40 per cent rate for the new RSPT.

“What we have to do is extract the maximum value for the Australian people as we go forward to reform our economy, to invest in our economy and to ensure our prosperity as we go forward,” Mr Swan said.

Earlier, he said the government was “interested and fair dinkum about consultation”.

“The government is involved in consultation,” Mr Swan said. “First of all, we have our consultation panel. Over 80 companies have been through that panel process and are talking to that panel. In addition to that, the government is continuing to talk to many mining companies about their views.

“What we are going to get for the Australian people is a fair share of the resources they own 100 per cent, a fair share – a tax which encourages investment and growth in the industry.”

The government’s consultation panel, headed by Treasury deputy secretary David Parker, will give its first report to the government tomorrow. It is expected to go beyond its strict limits for discussion and recommend the raising of the threshold for the super-profits tax to be lifted from 6 per cent, the long-term government bond rate, to about 11 or 12 per cent, the bond rate plus five or six percentage points.

As reported in The Australian on Monday, the lost revenue would be covered by the withdrawal of the 40 per cent compensation for failed projects to enable the government to keep its budget projections, including a $1bn surplus in 2012-13, intact.

Mr Parker said yesterday the proposed RSPT as a result of the Henry tax review was “the architecture of reform, not the engineering drawings”.

“With such reforms, there will always be winners and losers, with some groups more vocal than others,” Mr Parker said. “The challenge is to work together to address the issues that will inevitably arise.”

Government sources confirmed that the panel was expected to recommend major changes to the proposed RSPT, including raising the threshold, but others warned it was unlikely there would be an early settlement of the negotiations with the mining companies.

In Adelaide, Mr Kloppers said a 40 per cent tax rate may have been considered appropriate when it was devised for the petroleum industry in the 1980s after two years of consultation but it was “a giant, naive extrapolation to think miraculously the same one is the appropriate rate for every mineral in 2010”.

“BHP Billiton, being in the oil and gas industry and in the minerals industry, has experience on both sides and, more than other players, we understand the difference between the products themselves and between minerals more broadly,” he said.

“Retrospectivity on this tax is the key determinant for Australia as a destination for investment.

“It goes against the core offering that Australia has, which is being a stable place for investment.”