Last Updated :
02 July 2010 at 10:45 IST
Australia cuts mining super tax to 30 percent
CANBERRA (Commodity Online) : As expected, Australia on Friday slashed a super tax on mining profits from 40 percent to 30 percent to end a row which led to the down fall of a government Down Under.
The revamped resources tax will apply from July 1, 2012. The threshold at which the tax will kick in has also been raised from 5% to 12%.
It means that the tax will bring in $1.5 billion less than the government had originally wanted. Only coal and iron ore companies will now be targeted. This will reduce the number of companies affected from 2,500 to 320.
In May, former Australian Prime Minister Kevin Rudd announced a forty percent super tax on mining profits and said it was non negotiable.
However, strong vocal opposition from the mining giants led to a multi-million dollar advertising campaign being waged on the nation's television screens.
It led to the government having to justify a measure which critics said could hit the Australian economy.
BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc shares rallied today after they approved the revisions at a meeting with Gillard last night.
BHP, the world’s biggest mining company, rose 0.6 percent in Sydney trading. Rio Tinto climbed 0.9 percent. Fortescue Metals Group Ltd gained 1.5 percent.
The agreement may help persuade companies to start work on $21 billion of delayed projects. The Australian dollar rose to 85.04 U.S. cents from 84.34 cents in New York yesterday.
Under Rudd’s proposal, miners would have paid a 40 percent tax on profits above a 6 percent return on investment on projects in Australia. That would have made the nation the world’s highest taxing for mining companies.
Australia's new Prime Minister Julia Gillard’s agreement applies the tax to the profits of iron ore and coal and it extends the current Petroleum Resource Rent Tax to all onshore and offshore petroleum and gas projects.
Miners welcomed the agreement, saying it was a positive outcome and a fundamental improvement from the earlier plan.
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