The meeting today between Julia Gillard and BHP, Rio Tinto and Xstrata appears to have resulted in a peaceful resolution to the mining tax war which was developing between the Government and the Australia’s largest mining companies. The points of compromise appear to have been where the kick in rate for the tax comes in which was previously set at 5% and it has now been agreed that it will be at 12% as well. It also appears that a the government has given ground on the two biggest objections of the Mining industry. The first of these was that the tax would be retrospective. The mining companies can now avoid the costly taxation over the Pilbara mines in Western Australia and the rich coal reserves along the east coast of Australia as these are existing assets and the government appeared to accept that it would not make the tax retrospective in its application. This is a very large concession. It is also one which could potentially have flared a constitutional argument against the tax because retrospective legislation is only of questionable constitutionality. The other major concession which the government seems to have given is that it now accepts that 40% was too high as a tax on the Miners and some slightly lower figure will now be accepted. The proposed tax was the highest in the world by a long shot, with only Norway’s Oil Super-Profit Tax coming close in terms of its rate of profit capture.
Naturally, the imposition any greater amount of taxation is an imposition on industry which will make it less competitive internationally and prevent the Australian Mining industry from growing and creating more jobs (which would in turn yield greater tax revenue). However, this argument is not accepted by the government. Under Mr Rudd’s watch, an enormous government debt accumulated and this must now be repaid in some method, the mining tax appears to be the popular tax that the government can think of to fill this giant hole in its budget.
