The Australian government’s proposed new tax on Australian mines and mining companies announced in early May 2010 drew continuous and heavy fire from all sectors of the nation’s mining industry and leading opposition political leaders during the two weeks following the announcement. Government spokespeople called the industry response a “scare campaign” but did not offer coherent responses to the specifics of industry criticism.
On May 21, BHP Billiton reported that its representatives had met with the Resource Tax Consultation Panel advising the Australian government on its proposed tax on the Australian resources sector. “BHP Billiton conveyed to the panel that the proposed super tax has been designed in a way that has the unintended effect of dramatically slowing investment in Australia and putting the future prosperity and employment prospects of all Australians at risk,” the BHP Billiton statement said.

“BHP Billiton conveyed the four principles of sound tax reform were not present in the proposed super tax. As previously conveyed to the government, BHP Billiton believes any new tax on the minerals resources industry needs to:
•    Be prospective in application, so as to preserve Australia’s position as a stable place for investment.
•    Ensure the overall tax burden is competitive with other mineral resources countries, or Australia will lose investment to countries with more attractive tax regimes.
•    Vary by commodity, because the investment characteristics and margins of individual minerals are different.
•    Be levied on the value of minerals alone—and not unintentionally penalise investments in infrastructure, processing or other enabling activities.

“BHP Billiton conveyed to the Resource Tax Consultation Panel that the proposed tax does not recognize how investment decisions are made in the industry and would place Australia in an uncompetitive position globally.

“In particular, BHP Billiton urged the Resource Tax Consultation Panel to recommend to the Government that the time be taken to properly engage with the industry on all aspects of the tax, rather than pursue selective adjustments, in order to achieve the objectives of tax reform that benefits Australia.”

BHP Billiton’s summary of its objections to the proposed tax were repeated from various perspectives by almost all key participants in the Australian mining industry.

Daily reports in Australian newspapers chronicled the progress, or lack of such, in the debate. Under a headline, “Muddled Message Won’t Sell Tax,” in the May 22 edition of the Sydney Morning Herald, Lenore Taylor reported, “Deepening divisions inside the Rudd government about the resources super profits tax, which is probably one reason the messages about its budget centrepiece have become so muddled. Another is the woeful job Labor has done explaining the complicated new tax, apparently on the assumption that voters wouldn’t bother so much with the details and would intuitively side with the champions of the working people rather than with mining bosses in whose companies they hold shares.”

Perhaps the government will find a way to strike a truce with the mining industry, or perhaps not. In any event, the confrontation may take some weeks or months to play out and will be watched with more than casual interest by the mining industry worldwide.

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