With the Australian Labor party retaining power with a slim
majority in parliament, hopes for a quick death of the proposed
Minerals Resource Rent Tax have been dashed.
But the exact form of the tax remains open to question, dragging
out the lingering uncertainty for mining companies looking to
invest in Australian assets.
Prime Minister Julia Gillard has ruled out dumping the mining
tax, and any dramatically watered-down version of the legislation
would struggle to make it through a Senate, which will be
controlled by the left-wing Greens from July 2011.
But none of the four non-party members of parliament, including
independents Rob Oakeshott and Tony Windsor, who announced their
support for the Labor government Tuesday, have voiced unqualified
support for the MRRT.
Indeed, at a press conference announcing their support for the
government, Oakeshott said he wants the government to go back to
the drawing board and hold a public consultation on the Henry Tax
Review, an 18-month review of Australia's taxation system which led
to Resource Super-Profits Tax, a previous version of the MRRT.
Andrew Wilkie, an independent from Tasmania who is also
supporting Labor, has also stated his preference for the Henry
review's tax proposals.
Oakeshott said Tuesday he had persuaded the government to agree
to a tax summit by June 2011 to discuss the Henry review and have
"a fair dinkum open debate about taxes" in Australia.
That agreement came amidst the flurry of horse-trading leading
up to the two independents' decision Tuesday.
Officials in the Treasury and the Department of Resources,
Energy and Tourism said they had no details of such a summit, which
would have been negotiated with Gillard's political office, while
Treasurer Wayne Swan, who said he would be "delighted" to have a
debate on tax, wouldn't be drawn on whether the MRRT would form
part of the summit discussions.
But the Association of Mining and Exploration Companies, a lobby
group that represents mostly smaller miners and explorers, seized
on Oakeshott's proposal to demand the MRRT be junked.
"If you truly want to entertain the idea of proper tax reform it
can't be piecemeal," AMEC's chief executive Simon Bennison said.
The MRRT "should be taken off the table and you can engage in a
proper consultation with industry".
Other voices may prove stronger than AMEC's.
A source close to the larger miners said they regarded
assurances by Gillard during the election campaign-that the MRRT
would not be changed as categorical.
At the same time, a tax settlement more generous to the miners
would attract the opposition of Greens MP Adam Bandt, the fourth
non-Labor supporter of Gillard in the House of Representatives.
The mine tax is notably absent from the five-page supply and
confidence agreement between the Greens and Labor signed last
Wednesday, outlining issues on which the two parties will work
together.
But despite a pledge to amend the mine tax law and raise an
additional A$2 billion for schools, Greens leader Bob Brown said on
the eve of the election that he would not block the MRRT if his
amendment failed.
The tussle comes after a long and tortuous gestation for the
tax.
An additional tax on miners was first proposed as the government
of former prime minister Kevin Rudd's response to the Henry review
in early May.
The original RSPT would have imposed a 40% levy on all domestic
mining and onshore petroleum profits above the 10-year government
bond rate.
But the RSPT was abandoned in late June after Rudd was deposed
by his own Labor party amidst vocal opposition from miners.
The revised MRRT, agreed in July within a week of his successor
Gillard taking office, reduced the levy to an effective rate of
22.5% and limited its scope to iron ore and coal profits above A$50
million a year.
That won the approval of the country's peak mining lobby group,
the Minerals Council of Australia, and of BHP Billiton Ltd.
(BHP.AU), Rio Tinto Ltd. (RIO.AU), and Xstrata PLC (XTA.LN), which
thrashed out the shape of the revised tax with Gillard's
government.
But smaller miners, including AMEC, continued vocal opposition
throughout the election campaign.
Megan Anwyl, a lobbyist who acts for several iron ore mining
companies and bodies, said that most companies were now resigned to
the tax.
"I'm finding as the weeks are going by that they're assuming
there'll be some form of mining tax down the track anyway."
However, a strategist at the local office of an international
investment bank, who did not want to be named because he was
speaking outside his formal expertise, said that Gillard may still
find it hard to pass the law.
"You've got a government that's been re-elected on 38% of the
primary vote so that hardly gives them the mandate for change in
this area," he said.
"Rather than getting clarity over this issue it's going to be
one that continues to hang over resource stocks. How it ends up is
as unclear as it was three weeks ago, or even three months
ago."
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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