SCENARIOS-Odds narrow for a mine tax under new Australia PM

By Reuters Staff
June 28, 2010

By James Regan

SYDNEY, June 28 (Reuters) – The odds of Australia introducing a tough new mining tax have improved under the popular new Prime Minister Julia Gillard who is tipped by pollsters to lead her Labor Party to a general election win this year.

Miners had counted on former premier Kevin Rudd losing the election, expected between August and November, thereby killing the tax proposal which would have only been considered by parliament if Labor formed the new government.

But the first Nielsen poll since Gillard took over on Thursday showed an eight-point swing to the government and gave Labor a comfortable, 55-45 lead over its the conservative opposition.

Gillard has shown a willingness to negotiate so-far unspecified components of the tax before the election, particularly an earlier proposed 40 percent super profits levy, indicating it is a top priority for her administration.

But she has made it clear miners should expect to pay more starting in 2012.

WHY GILLARD MAY BUDGE ON THE TAX BEFORE AN ELECTION

Gillard says she is aware of the “anxiety” among Australians over the battle with miners and is concerned uncertainty determining the final form of the tax was harming her Labor party and dividing the nation.

This could hasten repackaging the tax as early as this week, addressing key issues of the headline 40 percent rate, 6 percent threshold and its application to existing growth projects.

She also says the mining industry is open to paying more tax, but acknowledges not as much as tabled by the Rudd proposal on May 2.

Deputy Prime Minister Wayne Swan has told reporters in Toronto for the G20 summit that he wanted to end the row over the tax as “promptly as possible.”

IF ABBOTT WINS, THE TAX GOES

Main opposition leader Tony Abbott opposes the tax outright, and has publicly promised to scrap it if elected, warning the impost would result in the loss of thousands of jobs and stymie economic growth in Australia.

An Abbott win could encourage states to extract higher royalties from mining companies operating in their borders.

Abbott would prefer this form of additional mining taxation as a way to avoid intervention at the federal level.

POLITICAL, NOT MINING SECTOR, NEGOTIATIONS COULD DELAY A RESOLUTION

Miners have said they are open to swift negotiations with Gillard. But the Greens party is vowing to block any attempt to seriously water down the tax.

The Greens, whose support will be crucial to ensure the tax proposals pass through parliament, have warned their support for the tax is based on the original 40 percent tax rate, and any big concessions would be an unwelcome windfall for miners.

This means Gillard will need to be careful with any deal with the miners. She needs to mollify miners to avoid a damaging election showdown on the issue, but risks parliamentary failure if she makes too many concessions.

(Editing by Ed Lane)

((jim.regan@thomsonreuters.com; +61-2 9373-1814; Reuters Messaging: jim.regan@reuters.net)) ((If you have a query or comment on this story, send an e-mail to news.feedback.asia@thomsonreuters.com))

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