Source: http://www.miningweekly.com    Date: May 12, 2010

Australia's government may be willing to give ground to big miners over a new tax of profits, media reports have said, as resource firms kicked off a major election-year advertising campaign to overturn the tax. While the government was unlikely to shift on the 40% rate of its "super profits" tax, it had opened the door to changes on when the tax kicks in and what defined a super profit, the West Australian newspaper has said, without citing sources.

The government was looking at concessions on transitional arrangements and there was scope to move on the definition of a "super" profit which under the plan would be anything above the government 10-year bond yield, now at 5.5%. The super profit mark for the similar petroleum resource rent tax is at least five percentage points higher.

Prime Minister Kevin Rudd, favored to win another term, played down talk he might water down his proposed tax, saying the government had "got the rate about right". He told local radio, "We want to make sure that by imposing a super tax on the resources of Australia's most profitable mining companies that the Australian people are getting their fair share of the resources that they themselves own."

Rio Tinto said the tax could erode Australia's competitiveness, severely curtail investment, and limit jobs growth. "And just as importantly, altering the rules for existing multibillion dollar projects in midstream - after large amounts of capital have already been put at risk over many years - would be the worst possible message Australia could send to investors,", a senior official said.  “Other countries are more than willing to take advantage of Rudd’s blunder and entice business away from Australia.”

Resources Minister Martin Ferguson has begun a national "listening tour" to consult with resource companies, but miners ramped up their fight against the tax with full-page newspaper ads, to be followed by a television campaign. "The minerals resources industry paid USD70.9 billion in taxes and royalties in the past decade. The resources sector pays Australia's highest tax rate. That's a fair share," the advertisement read.

In a quirky attempt to highlight the issue, Mr. Andrew Forrest, the CEO of Australia's third-largest iron ore miner, Fortescue Metals Group, presented Mr. Rudd with a pair of boxing gloves at a dinner attended by mining executives.  Stitched onto the gloves was: "Fair suck of the sauce bottle mate", an Australian plea for fair treatment.

Oil and gas producer Santos, which is building an AUD8 billion liquefied natural gas facility in Queensland, said the tax would paralyze investment in Australia.