Rudd Denies Mining Tax Change After BHP's Attack

by Mary Swire, Tax-News.com, Hong Kong

14 June 2010

After Jac Nasser, the Chairman of BHP Billiton, wrote a letter to shareholders reiterating the company’s opposition to the Australian government’s resource super profits tax (RSPT), Kevin Rudd, the Prime Minister, refuted suggestions that the government was about to make changes to the proposed tax.

Jac Nasser began by trying to explain why BHP Billiton and the rest of the resources industry had not engaged in more consultation with the government to find a solution to their differences over the 40% RSPT. “For reasons we do not understand,” he wrote, “the government chose not to undertake consultation on the nature and design of the proposed super tax prior to its announcement.”

“We always welcome the opportunity to consult but unfortunately (and despite our efforts) there has been no acknowledgement by the government of the major flaws of the proposed tax and the significant impact on the industry,” he continued. “Substantive redesign of this proposed tax is necessary and, if this can't address its fundamental failings, it should be abandoned.”

He confirmed that BHP Billiton is not against tax reform, but believes that any new tax on the minerals resources industry should not fundamentally change the rules of the game on existing projects, both as a matter of fairness and so as to protect Australia's reputation as a stable place for investment.

He felt that the government should make sure the overall tax is competitive with other mineral resources countries, or Australia will lose investment to countries with more attractive tax rates; and he expressed the opinion that a new tax on the industry should vary in rate by the kind of mineral resources mined, because the investment and financial characteristics of individual minerals are different.

BHP Billiton has also said that it is disappointed that the government has misrepresented the level of taxes it pays on its Australian operations. The government has stated that BHP Billiton has paid only 13% to 17% tax on its Australian profits. However, the company has disclosed that, in the 2009 financial year, it paid total taxes to the Australian federal and state governments of AUD6.3bn (USD5.35bn), resulting in an effective tax rate of around 43%.

However, in the face of such strong opposition from BHP Billiton, and many others in the resources industry, Kevin Rudd, Australia’s Prime Minister, in an interview, refuted suggestions in the media that the government was shortly going to announce major changes to the RSPT.

His opinion was that there would be “weeks and probably months of consultation yet with the major mining companies. We'll work our way through the detail. I've had some good discussions with heads of mining companies.”

“The key thing,” he added, “is to make sure we get a fair return for the mining companies, and a fair return on the resources owned by all Australians. What I have said from day one is that we think we've got the rate of this tax about right. And we've also said we'd consult with industry on detail, on implementation, and generous transition arrangements.”

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