Palmer digs govt out of hole on mining tax

By Agencies in Sydney and Canberra | China Daily | Updated: 2014-09-03 09:33

Australia agreed on Tuesday to dump a hotly disputed profits tax on mineral resources after the government struck a surprise deal with senators, including mining tycoon Clive Palmer.

The Minerals Resource Rent Tax was introduced by the previous Labor administration in 2012, with a 30 percent levy on annual profits above A$75 million ($70 million) on iron ore and coal.

The tax was intended to return a share of the spoils of Australia's mining boom over the last decade to government coffers, but was criticized after its revenues fell dramatically short of forecasts.

"The mining tax is now gone," triumphant Treasurer Joe Hockey told the country's parliament after the Senate - where minority parties hold the balance of power - voted 36 to 33 for its repeal, a key election promise of the Tony Abbott-led conservatives.

It now heads to the lower house where it is virtually guaranteed passage, as the government has the numbers to push it through.

"We said we'd get rid of the mining tax. We've delivered in full," Hockey said. "The tax package was so poorly designed, it was, in fact, costing the government billions of dollars each year."

The tax regime was initially watered down after a furious publicity campaign by BHP Billiton, Rio Tinto and Fortescue, which contributed to the ouster of Kevin Rudd as prime minister, who was succeeded by his deputy Julia Gillard in 2010 as Rudd's poll ratings plunged.

The big miners claimed the tax hurt their competitiveness and affected investment.

The Labor government originally estimated that the levy would raise A$3 billion in its first year of operation and A$9 billion in 2013-14.

That was drastically scaled back. According to the 2013 budget, the tax raised a mere A$200 million in the 2013 financial year and was forecast to bring in A$700 million in the 12 months to June 30 this year.

The scrapping of the tax was made possible after the government struck a deal with minor parties led by the Palmer United Party, whose leader is a coal magnate.

"Instead of getting a fair share from the big end of town that can afford to pay, coal mining billionaire Clive Palmer has done a tricky deal and put the pressure back on workers and families," the opposition Greens Party leader, Sen Christine Milne, said in a statement. "Champagne corks will be popping in mining company boardrooms, while Australian workers will face less money for their retirement."

Milne said the deal was a win for the big miners and for the flamboyant Palmer.

"If ever there is a conflict of interest, it is this one," she told the Senate. "How is it possible that you can have a coal billionaire voting to vote down a mining tax?"

Palmer insisted the move made no difference to his coal mining interests in Queensland, saying he was "retired" and no longer chairman of any company.

"We all pay tax. Does that mean that members of parliament don't vote on income tax bills?" he told reporters.

Dumping the tax is a major win for Abbott and follows his victory in July when he succeeded in abolishing a divisive carbon levy after years of vexing political debate.