BHP, Rio Tinto, Xstrata Unite Against Australian Mining Tax

Mary Swire, Tax-News.com, Hong Kong

18 June 2010

After a joint meeting with the Australian government, executives of three of the largest mining companies, BHP Billiton, Rio Tinto and Xstrata, issued a joint statement in which they complained that there had been no movement by the government on the proposed resource super profits tax (RSPT).

While the Minerals Council of Australia has continued its campaign against the tax on behalf of the sector, the joint statement by the three mining companies is unprecedented. However, the companies appear to be frustrated by the government’s stance. As Jac Nasser, the Chairman of BHP Billiton had already said, in a letter to shareholders, the government is not consulting on the “nature and design” of the RSPT.

The joint statement said: “During the meeting the companies outlined three fundamental areas of concern with the RSPT - ensuring the RSPT is not applied retrospectively, so existing projects where investment decisions have already been made are not affected; the need for an effective tax rate that retains Australia's international competitiveness as an investment destination; and stability arrangements for taxes and royalties for existing and new projects.”

“At present,” it concluded, “there is no formal acknowledgment from government that these key issues will be addressed.”

Recent statements by members of the government appear to confirm that the government is focused on talking to the mining sector on how the mining tax is to be imposed, rather than concerns about its fundamental structure.

Martin Ferguson, the Minister for Resources, said recently in an interview, “there will be a profits-based tax system - that's what industry wanted - and there will be a headline rate of 40%.” He confirmed that, in his negotiations with the mining industry, he is focusing on the “potential generous transitional arrangements that enable us to achieve our objective.”

He agreed that, with regard to those arrangements, the government recognises that, while there will be no special deals to particular sectors, there was no “one-size-fits-all model”, and that there are different types of groups within the sector, particularly in low value resources, such as sand and gravel.

Australia’ Prime Minister, Kevin Rudd, had also made the same point during one of his interviews. “We are consulting and negotiating with the industry about detail, about implementation and about generous transition arrangements,” he reiterated. “It's quite plain that we will be considering with different parts of the industry their respective requests for transitions arrangements which may be particular to their industries. Whether we respond positively to that is a separate matter, but that's currently the consultation negotiation which Martin Ferguson is directly engaged in.”

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