40%

[peat]

its gonna hurt.

[Huang Chung]

its gonna hurt.

Unless you're riding BHP or RIO, I really don't think we know enough at this stage to tell if it's going to hurt, or not.

Is it 40% of profit on all mining activity in Oz, or just if a 'super' profit has been generated? If the latter, what constitutes a 'super' profit? Also, the rebates for exploration expenditure may actually benefit explorers and smaller miners who still have a proportionately high level of exploration expenditure.

Looking forward to more details on what the changes will mean.

[peat]

sure
there is some detail on businessspecator site
but the complexity of compliance will be a cost in itself

[Huang Chung]

What about miners that have both local and overseas operations.....depending on the taxation regime in the other jurisdiction(s), you would think the accountants would be working overtime to book the profits to the overseas operation to avoid the tax that would be slugged on the Oz projects.

[Lizard]

Gottliebsen of the Business Spectator seems to reckon that it will cost RIO and BHP about $3bn each in additional tax from 2013-14. Actually, he credits Merrill Lynch with the analysis. It's about 30% and 19% of current profits respectively. Seems a substantial ask.

On the other "winners" side of the Henry Review (or at least the governments very limited take of it), I find the definition of a "small business" to be amazingly limited with a cap at revenue of $2m! A business would be lucky to employ more than 3 people on that (particularly given the tax benefit is only a benefit if the business is profitable).

[Huang Chung]

I guess for a lot of the ST fraternity who have more speculative mining portfolios, it is still unclear whether there will be a benefit or cost to them coming from these changes to mining taxes.

For the BHPs of the world, it seems quite clear that the changes are a negative.

[Dr_Who]

Regulatory risk and uncertainty will make these stock volatile in the short term.

[JBmurc]

Glad most of my moneys tied up in explorers an producers with assets an cashflows outside aussie an the ones that I do hold that are only in aussie are jnr explorers which by the sounds of it will be better off with better right-offs
Still Can't see Rudd staying in power so this will most likely not go ahead
Overall the resource market will be treated like it's already law ,great buying opts for the savy

[Ish]

What about miners that have both local and overseas operations.....depending on the taxation regime in the other jurisdiction(s), you would think the accountants would be working overtime to book the profits to the overseas operation to avoid the tax that would be slugged on the Oz projects.

I'm sure they will be. But there are transfer pricing tax rules to consider, and given they are such large companies their profits will be in the spotlight and under scrutiny. I cant imagine they will have too much wriggle-room.

[JBmurc]

The next Aus election is april next year can't see Rudd staying in power the opposition is completely against the new Tax reform -bye bye Rudd bye bye new tax

[Casa del Energia]

its gonna hurt.

Ow!

Oh well, I was going to top up on BHP anyway.

40%. !! They're insane.

Makes NZ miners look really attractive again.

Long live PRC WID NZO etc.

ARM... 83c double owch.

Really hurting here. I'm off to find a nice scenic cliff to jump off.

[CJ]

About AU$8b wiped of both of BHP and RIO. Just goes to show how powerful Govt are.

[Casa del Energia]

About AU$8b wiped of both of BHP and RIO. Just goes to show how powerful Govt are.

I wonder if they had really thought this one through. The immediate effect is lower sp's but down the track
IF commodities cool off, IF India and China stumble, how many miners will go bust, fail to re-invest, mine elsewhere?

Aussie is about the only western outfit that is doing well - and that is becuase of the mining. Could be shooting themselves in the foot with 78 grain ammo? (78 grain makes really, really big holes in what ever it hits).

[COLIN]

Looks like the talks with industry are going badly. Labour Government seems determined to kill the goose that is laying the golden egg, presumably on the basis that their supporters are not likely to be the type of voter that will desert them. Little do these people seem to realise that the negative effects will filter down to their level, meaning loss of jobs, pension earnings, and the like, as investment in new projects wanes.

Rio and BHP sliding again in London tonight. Also, I hadn't realised that the moves are retrospective! Apalling.

[shasta]

I'm sure they will be. But there are transfer pricing tax rules to consider, and given they are such large companies their profits will be in the spotlight and under scrutiny. I cant imagine they will have too much wriggle-room.

Yeah the old thin capitalisation rules will kick in, but the Australian Govt has really dropped the ball here, now most exploration will be done elsewhere & at the detriment of the Australian economy!

[Dr_Who]

Yeah the old thin capitalisation rules will kick in, but the Australian Govt has really dropped the ball here, now most exploration will be done elsewhere & at the detriment of the Australian economy!

Yep, Aussie govt have lost touch with reality. Thats what you get with a socialist govt. Very sad :(

[Huang Chung]

Yeah,

Privatise the risk
Socialise the profits....

[h2so4]

"No no, more tax means more investment and more jobs."

Hello....There is no ruddy value in ruddy tax?

[Hoop]

Another Kruddy decision
This rather bizarre headliner on MarketWatch would make a great joke intro..... except its true and its a worry that overseas investors may start to factor in political uncertainty into the shareprices on the ASX.

Australia's government on Friday invoked emergency powers to embark on an advertising campaign to promote its planned new 40% tax on mining industry super profits.

It goes on to say that...

"....Under Australian campaign advertising guidelines, political parties are constrained from running campaigns for party political purposes, except when the campaign is initiated on the basis of a national emergency, extreme urgency, or other compelling reasons...."

Hmmmm...I'm having trouble trying to decide which reason the campaign is initiated on ...National emergency???? hmmm maybe not ;)

Article from today's MarketWatch (http://www.marketwatch.com/story/australia-uses-emergency-power-to-promote-mine-tax-2010-05-28)

[trackers]

Another Kruddy decision
This rather bizarre headliner on MarketWatch would make a great joke intro..... except its true and its a worry that overseas investors may start to factor in political uncertainty into the shareprices on the ASX.

Australia's government on Friday invoked emergency powers to embark on an advertising campaign to promote its planned new 40% tax on mining industry super profits.

It goes on to say that...

"....Under Australian campaign advertising guidelines, political parties are constrained from running campaigns for party political purposes, except when the campaign is initiated on the basis of a national emergency, extreme urgency, or other compelling reasons...."

Hmmmm...I'm having trouble trying to decide which reason the campaign is initiated on ...National emergency???? hmmm maybe not ;)

Article from today's MarketWatch (http://www.marketwatch.com/story/australia-uses-emergency-power-to-promote-mine-tax-2010-05-28)


Hi Hoop, crazy stuff indeed.

The public realise that the government have got it wrong so the govt, instead of backtracking on their utter stupidity in the first place, instead approve emergency funds to 'correct' the publics perception... Shambles. A couple of other gems:



These guidelines require any taxpayer-funded campaign costing over $250,000 to be vetted by an independent committee.

The Auditor-General was dumped from this vetting role in March.

The Special Minister of State, Joe Ludwig, granted the waiver following a "request" from the Treasurer, Wayne Swan.

[COLIN]

Crikey! The sort of behaviour you might expect to see in a Banana Republic! But then, again, that might be how the international investing community will come to see Australia.

[bermuda]

Crikey! The sort of behaviour you might expect to see in a Banana Republic! But then, again, that might be how the international investing community will come to see Australia.

Colin,
I am gobsmacked by this whole thing. Have a look at the ESG thread on Hotcopper if you want the true feeling.

Thank goodness NZ has John Key. The Australian Govt are seriously short of commercial/private experience. Frightening actually.

[gazprom1]

Not sure I agree Belgarion. TEL has been been in turmoil for the past few years not just since Key took over. At least the government is trying to promote business investment in NZ.

[Hoop]

Not sure I agree Belgarion. TEL has been been in turmoil for the past few years not just since Key took over. At least the government is trying to promote business investment in NZ.

No I don't agree with Belgarion either on this one.
TEL, the Governments naughty ex-child, bought this upon themselves.....the government really had no option in the end, but to enter the room with the big wacking stick.

[mattyroo]

From the Alan Kohler's latest Eureka report:

The Rudd government has been keen to spin the message that proposed Resources Super Profits Tax will not affect how international investors perceive Australia. Rudd also claimed that the recent selloff in the Australian dollar is part of turmoil in global markets. Of course, both assertions are complete bollocks.

I’ve run a quick check on the exchange rates of alternative investment destinations and it’s clear that Australia is now being shunned in favour of stable, low-risk investment alternatives such as Mozambique, Thailand and Somalia.

$A change against selected currencies since the RSPT was mooted
Country (Currency) Code Apr-26 May-26 $A decline
Mozambique (Metical) MZN 31.6 22.8 27.90%
Vietnam (Dong) VND 17506 14476 17.30%
Thailand (Baht) THB 29.8 26.8 9.80%
Algeria (Dinar) DZD 67 60.5 9.60%
Somalia (Shilling) SOS 1380 1249 9.50%
South Africa (Rand) ZAR 6.9 6.4 6.40%
Philippines (Peso) PHP 41 38.5 6.00%
Brazil (Real) BRL 1.6 1.5 5.50%
Mauritius (Rupee) MUR 28 26.7 4.60%
Albania (Lek) ALL 94.5 90.2 4.60%

And you can see why. Despite the fact that they are currently engaged in civil wars or that the only growth they are seeing is in piracy, their governments aren’t about to start expropriating the profits of their key export industry.

[POSSUM THE CAT]

John Key has given NZ business a kick in the guts. Who are the idiots that think the ETS & the rise in GST is good for business? With Most customers having the same to spend & dramatically higher prices how can this be good for business.

[gazprom1]

John Key has given NZ business a kick in the guts. Who are the idiots that think the ETS & the rise in GST is good for business? With Most customers having the same to spend & dramatically higher prices how can this be good for business.

Hi Possum,

I agree that ETS should be reviewed/ deferred/axed.

What "customers" are you referring to? The customers of the businesses? GST wll have a one-off inflationary effect. GST/ VAT is an extremely efficient and fair tax - harder to avoid/evade than other forms of taxation. The more you spend, the more you pay. I do not know what is going to go up "dramatically"? Most people do not spend 100% of their income and, if they do, not 100% will be subject to the GST increase (rent, interest income, for example). Businesses, if they are smart will be formed under a corporate structure, and have therefore had their tax rate reduced by more than the GST rise. A low flat tax system is the ultimate goal. As a business owner, the current investment climate in NZ is excellent in my circumstances.

If we are talking about dramatic rises, look at dairy prices...cheese, butter and other products are not going to rise by 2.5%, they are going to rise by more than 5% and more likely 10% or 20%!!!

[POSSUM THE CAT]

Gazprom1 you Are quoting university theory but use your brain if 20% of customers have more money to spend and 80% have less how can this be good for business
Take customers on NZ Superannuation a 2% rise in income from tax cut $2.50 rise per week against a 2.5% rise in GST average cost quoted by GOVT $3.00 per week but the elderly usually spend all their income on GST items this makes the cost to them more like $6 per week. This is because they usually do not pay rent or mortgage payment that are GST free. This is sample of how increasing GST is Bad for business. It is no use investing money in a business that is losing income due to a GST raise.As the reduction in income will be more than income tax cut. I was running a small business in 1989 the last GST rise did turnover go up 2.5% no it went down 2%
A reduction in GST to 10% and no wage increases or Income Tax cuts would be far more beneficial for the economy. And then you add the ETS and business is in for a big downturn. Tax advoidance by using Trusts is still a very big business in NZ after the changes. Take a lesson from our transtasman nieghbours where trust pay no tax it all has to flow through to the beneficiaries and if the beneficiary is a non earner like a child it is hit with the highest personal tax rate applical in Austalia wich I beleive at the moment is 48% when I was there it was 59%. And GST was 10% with all basic foods exempt. Definately there mining is some of the reason they are doing so much better than us but more money in the lower end income peoples pockets as there is no tax at all on some of your income (when I was there it was the first $5000.00 I think it is now $10000.00) This gives the majority of the population more money to spend and the economy grows very good for business. It is no use aiming your business at only the top 20% of the population that will have a little more money in their pocket.

[Snow Leopard]

The propaganda war (http://www.theage.com.au/national/pm-miners-splurge-on-titfortat-ads-war-20100529-wmlc.html) must be good for them.

[gazprom1]

PTC,

Not sure where you get your figures re 80% have less and 20% have more because of the GST rise. Look at the estimates (Treasury) and do your maths. Even IF your figures were correct re 80% being worse off (which they are not), 20% of the population pays the vast majority of the tax take. Coming back to economic theory, if that's what you would like to call it, if you decrease high marginal tax rates, those "high" earners will work longer and pay MORE tax despite being on a lower tax rate. The bottom 20% of taxpayers pay the best part of nothing but should contribute to society.

[darksentinel]

By my calculations* if you earn over $20000NZ gross then you'll be better off, even if you spend 100% of your earnings on GST-inclusive purchases. Since the minimum fulltime wage equates to $26000 per annum ($12.50*2080), the vast majority will be better off, especially since the average salary is a lot higher than this. Overall companies will pay less tax and their retail customers will (in general) have more purchasing power. Admittedly students, beneficiaries and superannuants will be worse off overall (which is arguably unfair on an egalitarian and moral level), but for most companies this is a minority of their customer base.

To the aussie discussion on mining tax: sorry for continuing the hijacking of your thread.


Calculations (please check, I'm not a fan of spreading incorrect information):
Someone earning $20000 will:

pay $280 less tax in the 0-$14000 bracket (14000*(.125-.105))
pay $210 less tax in the $14001-$48000 bracket ((20000-14000)*(.21-.175))
earn a net sum of $17480 per annum (14000*(1-.105)+(20000-14000)*(1-.175))
pay $437 more GST if they spent 100% of their income on GST-inclusive purchases ($17480*(.15-.125))

This would leave them with $53 more a year, compared with the previous tax regime. Not much, but that's not the point.

[POSSUM THE CAT]

Gazprom1 your figures are only using income tax. Take the total tax they pay including GST and your top earners pay very little % of the tax take. A retired person on NZ super wich is where the $14000 comes in nets 280tax cut. but pays 297.50 extra gst and is usually supplementing the super with some capital to even survive so this is means more extra gst and then you get the ets that flows all through the system this will cut business revenue and they may have to increase prices to cover there outgoings. It is lies dam Lies & Statistics that make it look like the top people pay the majority of the tax. Supermarkets are allready talking about serious price rises to cover their power and Transport bills. and you say John Key is gods gift to businesses.

[gazprom1]

PTC,

I did not say that John Key is gods gift to business - you just did. I said that from my perspective, the investment climate in NZ is excellent. We are being encouraged to earn more and pay less tax and I hope that busineses will then invest more. Like I said, the majority of NZérs are better off with the recent tax cuts/ GST rise. End of story - you don't have to be an economist/ accountant. Like DS said above, there are a group (beneficiaries being one) that will be slightly worse off and maybe this needs to be rederessed.

[POSSUM THE CAT]

Gazprom1 Two challenges to your business mind. One Divide $10000.00 among 100 people so some get an increase and others are no worse off. This is effectively what the tax cuts and GST increases were supposed to do and be fiscally neutral. Two workout how on an income of $24000.00 if I spend the lot Iam aproximately $300 worse off. My statement is that with a lot like this your investment climate unless you export most of your production will be a lot poorer through less customers, And with less turnover who is going to invest more in business. Or are going to cut prices to maintain turnover, this will still decrease your profit so why would you invest more in your business. Why not follow the Australians less GST and higher personal taxes and most of their businesses are doing far better than NZ businesses.

[gazprom1]

PTC,

The numbers are very simple...personal tax cuts $4 billion, GST increased tax take $2 billion. Net effect plus $2 billion to spend extra. Multiplier effect of $2 billion in economy...? You need to look at the big picture...not some extreme examples. My business mind is not "taxed" (excuse the pun) by the GST increase. Growth is what is required and the government is trying to achieve this through various measures. Australia has its issues as is evidenced by the 40% super profits tax. I am not suggesting that things are perfect but at least the government is trying to stimulate the economy and if you look at our comparative performance during the GFC, we have performed ok.

I am taking my business brain on holiday for a while Possum but will be checking in periodically.

[POSSUM THE CAT]

gazprom1 where did you get the extra 2 billion from if as they say the whole thing would be fiscally Neutral & that is the figure I beleive unless they are going to borrow another 20million a week. So my thoughts on the budget are it was put together by the Sherrif of Nottingham .

[darksentinel]

From English's summary:
Fiscal Income reductions: 2.92b total (2.455b income tax, 420m compensation for GST increase, 35m corporate and savings tax cut, 10m admin)
Fiscal Income increases: 2.455b (2.040 GST increase, 140m depreciation offset, 135m tobacco, 120m audit and compliance activity, 20m other)
Difference: -465m deficit.

Four year estimated deficit from this: 1.085b
Adjusted for "macroeconomic effects": 415b

Those are the official figures anyway. The discerning individual may pick up that this is not the "$4.5 billion per annum reduction in income tax rates" that is promised in the same article, but rather represents $4.5b worth of money shuffling.

Source: http://www.treasury.govt.nz/budget/2010/execsumm/b10-execsumm.pdf

[shasta]

I keep a close watchlist of 10 stocks i like covering the whole resource sector in general, which i review & change regularly.

I'm trying to find a like for like stock (or as close too) to replace KZL, as all there projects are based in Australia.

Can anyone recall any diversified resource companies already in production overseas, only PNA comes to mind (Copper/Gold)

Obviously there's BHP & RIO, but im looking more at the mid caps in the $100m - $1000m+ range.

Would prefer companies non coal & gold, but if either are a secondary source thats fine.

The super tax should be the end of Rudd, & i'm hoping it gets withdrawn, but just in case i thought i'd tap into the vast knowledge base that Share Trader has. (I'm sure others are looking around at overseas plays!)

I'm not interested in explorers (no matter how high the grades are etc), nor am i interested in near term producers

[shasta]

Update:

Found EQN a large Copper & Uranium producer in Zambia

Last Qtr produced > 67m/lbs (~30k tonnes) Copper = Revenue ~ $US200m, at a gross profit margin of $US1.47/lb ($3.07 - 1.60)

[trackers]

Update:

Found EQN a large Copper & Uranium producer in Zambia

Last Qtr produced > 67m/lbs (~30k tonnes) Copper = Revenue ~ $US200m, at a gross profit margin of $US1.47/lb ($3.07 - 1.60)

Hi Shasta,

700million shares on issue @ $4.30 a share.. So from those figures currently sitting at a P/E of about 10? Is there good upside potential?

[shasta]

Hi Shasta,

700million shares on issue @ $4.30 a share.. So from those figures currently sitting at a P/E of about 10? Is there good upside potential?

Upside comes from the rising price of copper (it has softened of late), & if they can upscale there uranium production, appears to be fairly priced at the moment

[peat]

The federal government believes it is close to reaching agreement with sectors of the

mining industry over its proposed super profits tax in the hope it can take some of the
heat out of the issue and ease the pressure on Kevin Rudd's leadership. As MPs arrived in
Canberra yesterday for what will be a critical parliamentary fortnight for Mr Rudd, some
warned that the discontent they had picked up in their electorates last week indicated it
would take more than fixing the mining tax to restore Labor's fortunes. Mr Rudd, who
needs a policy victory, has thrown himself into negotiations with the miners alongside his
Resources Minister, Martin Ferguson. It is understood he and Mr Rudd are close to an
agreement on transitional arrangements, which will mollify some companies but not the
big players such as BHP Billiton and Rio Tinto. Mr Rudd could announce the arrangements
as early as this week, which would go part of the way to addressing concerns about the
application of the tax to existing projects and take some of the sting out of the miners'
campaign.

[Hoop]

The

federal government believes it is close to reaching agreement with sectors of the


mining industry

over its proposed super profits tax in the hope it can take some of the
heat out of the issue and ease the pressure on Kevin Rudd's leadership. As MPs arrived in
Canberra yesterday for what will be a critical parliamentary fortnight for Mr Rudd, some
warned that the discontent they had picked up in their electorates last week indicated it
would take more than fixing the mining tax to restore Labor's fortunes. Mr Rudd, who
needs a policy victory, has thrown himself into negotiations with the miners alongside his
Resources Minister, Martin Ferguson. It is understood he and Mr Rudd are close to an
agreement on transitional arrangements, which will mollify some companies but not the
big players such as BHP Billiton and Rio Tinto. Mr Rudd could announce the arrangements
as early as this week, which would go part of the way to addressing concerns about the
application of the tax to existing projects and take some of the sting out of the miners'

campaign.


Rudd Plan A.........Lets give this great RSPT policy a little more time Martin... Once the media negativity dies away the people will realize how great this policy really is ..... .......Failed :t_down::(


Rudd Plan B...Create wiggle room, look for an exit... Show the voters that the Govt doesn't yield to "big boy" pressures......work in progress :mellow:

[Hoop]

Rudd Plan A.........Lets give this great RSPT policy a little more time Martin... Once the media negativity dies away the people will realize how great this policy really is ..... .......Failed :t_down::(


Rudd Plan B.........Create wiggle room, look for an exit... Show the voters that the Govt doesn't yield to "big boy" pressures......work in progress :mellow: UPDATE : Rudd didn't want to find an exit....Failed :mellow::(

New Plan C.............Fire Rudd (http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10654014) ........ work in progress :ohmy::)


Updated plan B and added todays new Labours Plan Deputy PM to oust Rudd for PM stakes today.

[trackers]

Updated plan B and added todays new Labours Plan Deputy PM to oust Rudd for PM stakes today.

Haha, love your work Hoop :D

Its great that Rudd's getting the axe, but does this mean another term for Labour???

[macduffy]

Rudd stands down!

What now for the super tax?

[Toulouse - Luzern]

Hi
I was watching Rudd and Gillard TV press conferences on CNBC today.
I also had AUDUSD live on my laptop screen.
When Rudd spoke the AUDUSD went up.
When Gillard spoke it went down...

[Hoop]

Mining tax issue Gillard's priority NZH article Fri 25th June 3.28pm (http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10654379)

----------------------------------------------------------------------------------------------------------------------------

Rudd Plan A.........Lets give this great RSPT policy a little more time Martin... Once the media negativity dies away the people will realize how great this policy really is ..... .......Failed :t_down::(


Rudd Plan B.........Create wiggle room, look for an exit... Show the voters that the Govt doesn't yield to "big boy" pressures......work in progress... :mellow: UPDATE : Rudd didn't want to find an exit....Failed :mellow::(

New Plan C.............Fire Rudd (http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10654014) ........ work in progress....:mellow::) UPDATE : SUCCEEDED :t_up:


Gillard Plan A...........Martin, I have a great new innovative plan to solve this RSPT policy problem...Lets create wiggle room, look for an exit... work in progress... :mellow::mellow::mellow:

UPDATE:
Article in Market watch (10 hours ago)...
Australia's Swan: Still want profit-based mine tax (http://www.marketwatch.com/story/australias-swan-still-want-profit-based-mine-tax-2010-06-24)....:mellow::mellow:

[mattyroo]

Big changes, thank christ!!!

PRIME MINISTER
DEPUTY PRIME MINISTER AND TREASURER
MINISTER FOR RESOURCES AND ENERGY

BREAKTHROUGH AGREEMENT WITH INDUSTRY ON IMPROVEMENTS TO RESOURCES TAXATION

Today the Gillard Government is proud to announce a breakthrough agreement on improved resource tax arrangements that addresses the concerns of the resource industry.

The new tax arrangements will underpin major economic reforms that will strengthen our economy so we can move forward together with confidence.

These arrangements will fund an historic boost to superannuation, new and better infrastructure, and business tax cuts including an up-front tax break and less red tape for small businesses to help them grow and thrive.

This agreement provides certainty to the resources industry, to mining communities right around the country, and to the broader Australian economy.

It sends a very clear message to the world that the Australian resources sector is strong and its future is secure.

The breakthrough agreement keeps faith with our central goal from day one: to deliver a better return for the Australian people for the resources they own and which can only be dug up once. It is the result of intense consultation and negotiation with the resources industry.

The improved resource taxation reforms focus on the most profitable resources, raise the uplift factor for tax losses, remove refundability and offer generous depreciation arrangements to promote new investment. They are more generous to industry in some respects, while industry has given ground in other areas. The improved profits-based taxation reforms will apply from 1 July 2012.

The improved resource tax reforms involve:

* a new Minerals Resource Rent Tax (MRRT) regime applying to iron ore and coal in Australia; and
* extending the current Petroleum Resource Rent Tax (PRRT) regime to all Australian onshore and offshore oil and gas projects, including the North West Shelf. This will provide certainty for oil and gas projects and ensure all oil and gas projects are treated equitably.

The Government will focus the resource tax reforms on our biggest and most profitable commodities: iron ore, coal, oil and gas. These represent three-quarters of the value of our exports and resource operating profits and account for an even greater share of resource rents in the mining industry. They also represent the vast bulk of growth in the sector over the coming decades.

Since the beginning of the mining boom, prices for iron ore have increased by over 400 per cent and prices for black coal have increased over 200 per cent.

Other commodities will not be included, which reduces the number of affected companies from 2,500 to around 320. These commodities were not expected to pay significant amounts of resource rent tax, and excluding them will allow many companies to remain in their existing taxation regimes.

The agreement also provides certainty for projects in the emerging industry of converting coal seam gas to LNG, by including all Australian onshore and offshore oil and gas projects, including the North West Shelf, in the PRRT.
Including all oil and gas projects in the one regime will ensure equitable tax treatment between competing projects.

To ensure the smooth implementation of the new arrangements the Government is establishing a Policy Transition Group (PTG) led by Resources Minister Martin Ferguson AM and Mr Don Argus AC to consult with industry and advise the Government on the implementation of the new MRRT and PRRT arrangements.

Further detail on the improved resource tax reforms is contained in the Attachment.

The improved resource tax reforms are estimated to reduce revenue by $1.5 billion over the forward estimates. As the Government has always said, all elements of the tax reform package are dependent on the package being balanced by the revenues from resource taxation.

The reduced revenue makes necessary the following revisions to the associated reforms:

* The company tax rate will continue to be cut to 29 per cent from 2013-14 but will not be further reduced under current fiscal conditions. Small companies will benefit from an early cut to the company tax rate to 29 per cent from 2012-13.
* The resource exploration rebate will not be pursued. Resource exploration costs will continue to be deductible in the normal way and the PTG will consider the best way to promote future exploration and ensure a pipeline of resource projects for future generations.

We believe these improved reforms offer the best chance of delivering for hard-working families and small businesses around Australia while protecting and growing our great mining industry.

All along, our objective has been to deliver Australians a better return for the resources they own, which can only be extracted once, and this plan will deliver on that commitment.

We came together as a nation to stare down the worst of the global recession and now we come together to reform our economy, improve our tax system, and move forward with confidence.

[JBmurc]

By ABC online political correspondent Emma Rodgers

The Federal Government has agreed major concessions with the mining industry in a redesign of its controversial super profits tax.

The changes, announced by Prime Minister Julia Gillard this morning, include reducing the headline rate of the tax from 40 per cent to 30 per cent.


Tax renamed the Minerals Resources Rent Tax



Will only apply to iron ore and coal


Iron ore and coal will now be subject to a new tax at a rate of 30pc instead of the original 40pc


Oil and coal seam gas to be rolled into the existing Petroleum Resources Rent Tax and taxed at 40pc


Tax will kick in at the government bond rate plus 7 per cent, which would be around 12 per cent


Changes mean the Government loses $1.5 billion of expected revenue
"We've been stuck on this question as a nation for too long," Ms Gillard told a press conference in Canberra this morning. "Today we're moving forward together."

The Government says the price of iron ore has increased by 400 per cent and black coal by 200 per cent since the beginning of the mining boom.

The exploration rebate has been scrapped, as has the measure that would have seen the Government share 40 per cent of the risk of projects.

"The new tax arrangements will underpin major economic reforms that will strengthen our economy so we can move forward together with confidence," Ms Gillard said in a statement.

The tax was supposed to fund a 2 per cent cut in the company tax rate, but the changes now mean there will only be a 1 per cent cut.

However the boost in compulsory superannuation contribution from 9 to 12 per cent will remain.

Today's agreement, after intensive discussions with Rio Tinto, Xstrata and BHP Billiton in Canberra this week, ends a two-month brawl with the resources sector which contributed to Kevin Rudd's ousting as prime minister.

The resolution is likely to increase speculation that an election will be called soon.

The legislation for the tax still needs to go through Parliament but will not be introduced until after the election, and the tax is not due to start until 2012.

The Federal Opposition has vowed to block the tax.

Dave R.