Australia's mineral resource rent tax passes into law
Finally, it's been passed into law.
Australia's Minerals Resource Rent Tax (MRRT) will now be imposed on a number of mining companies - though not all and not equally.
As we pointed out last year, the biggest players have been spared the excise on a significant proportion of their operations, after fierce corporate lobbying efforts. See: Who stitched up Australia's "ground breaking" minerals tax?
With its equally-controversial carbon tax already in place, the world's most important iron and coking coal exporter has set something of a benchmark among the world's "developed" mineral-dependent economies. See: A taxing debate reaches its climax down-under
However, critics of the MRRT claim that it will drive investment overseas, making the country even more dependent on economic growth by its biggest trading partner, China.
And, as acknowledged last week by Australian mega-miner BHP Billiton, Chinese demand for iron ore may soon dramatically fall. See: Fears of China: a summing-up
Australia passes controversial mining tax into law
19 March 2012
The Australian Senate has pushed through into law a 30% tax on iron ore and coal mining companies.
The tax will raise A$10.6bn ($11.2bn, £7bn) over three years from major companies including BHP Billiton, Rio Tinto and Xtrata.
Strong demand for raw materials from China and India has lead to a resource boom in Australia.
The mining tax is aimed at distributing the benefits of that revenue to other segments of the economy.
It comes into effect on 1 July.
"This important reform will provide a revenue stream to ensure that businesses in particular that are not in the fast lane of the resources boom get some tax relief," Treasurer Wayne Swan told Parliament.
The government wants to use the funds, amongst other things, to reduce Australia's company tax rate from 30% to 29%.
The measure passed through the upper house Senate with backing from the ruling Labor party and the Greens party, in a success for Prime Minister Julia Gillard.
However, the conservative opposition coalition is against the mining tax, saying it will drive investment overseas and cost thousands of jobs in Australia.
The Australian government originally announced a 40% mining tax in May 2010, but that set-off intense opposition from the mining companies.
That opposition was central to the Labor party's decision in June to replace Kevin Rudd as prime minister with Ms Gillard.
She then negotiated a 30% tax with the mining giants.
The government also won support for the tax by promising A$6bn in spending on infrastructure such as roads, rail and ports.
It also agreed to raise the amount paid to people's retirement savings to 12% of their salary by 2020, up from the current 9%.
Court threats loom as Australia's mining tax passed
By Madeleine Coorey
19 March 2012
SYDNEY - Prime Minister Julia Gillard Tuesday defended a controversial tax on Australia's China-fuelled mining boom after parliament passed it into law, as she faced down the prospect of a court challenge.
The tax has been disputed since it was first announced by then prime minister Kevin Rudd in May 2010, triggering a backlash from the powerful mining industry, which contributed to his ouster as leader.
The conservative opposition has vowed to repeal the tax if it is elected, with critics charging that it will drive investment overseas and make Australia more reliant than ever on growth in its biggest trading partner China.
But Gillard said the government wanted the benefits of the country's vast resources wealth to go to all Australians, not just "the privileged few".
The tax is due to start on July 1 and is expected to generate Aus$11 billion (US$11.7 billion) in its first three years, which the government plans to put towards funding infrastructure, pensions and tax cuts for small businesses.
"Australians know how important the mining industry is, but they also know that we can only dig up and sell the resources once," Gillard said in a statement.
"The Minerals Resource Rent Tax (MRRT) will deliver Australians with a fair return on the resources they own 100 percent," she said.
Australia is the world's biggest exporter of the iron ore and coking coal used in steelmaking, and the second-biggest exporter of thermal coal used in power stations.
Legislation that imposes a 30 percent tax on the extraordinary profits of coal and iron ore miners passed the upper house Senate late Monday by 38 votes to 32, with the government winning the key support of the Greens party.
The tax will kick in when a company makes Aus$75 million per year in profit.
The Labor government originally wanted a 40 percent tax on all profits generated by resources firms as the nation enjoys unprecedented demand for its huge mineral deposits, mostly from rapidly industrialising Asia.
But this was scrapped in favour of a 30 percent tax only on so-called super-profits from iron ore and coal, after an intense lobbying campaign from the powerful and wealthy mining industry, led by BHP, Rio Tinto and Xstrata.
Some miners are still unhappy, with major iron ore player Fortescue Metals Tuesday threatening legal action.
"As Fortescue has previously advised, the company has engaged senior counsel and will commence legal proceedings after the legislation has been enacted and legal opinion has been finalised," a company spokesman said.
Mining billionaire Clive Palmer also attacked the tax, saying the passage of the legislation was a "bitter blow" for Australian resource companies.
"The mining tax is only going to make Australian companies less competitive against foreign-owned opposition and ultimately it will threaten many Australian jobs," he said in a statement.
Gillard said she was confident of meeting revenue targets, despite the monies collected from the tax relying on the Australian dollar's exchange rate, mining volumes and commodity prices.
"China is still going to be buying in absolutely record quantities the things that we have to sell out of our resources sector," she told the Australian Broadcasting Corp.
Treasurer Wayne Swan said tax was aimed at capturing the benefits from the rise of Asia.
"This is just not a China story. It's an Asia story across the board," he told ABC. "There's a shift in weight from West to East that's coming our way."