BHP, Xstrata Win Battle With Australia Over Mine Tax Credits
BHP Billiton Ltd. (BHP) and Rio Tinto Group won their second mining-tax battle in Australia after the government agreed to allow them to credit future state royalties imposts against a planned 30 percent levy on their profits.
The government aims to release draft laws in coming months and introduce the legislation in the second half of the year, Treasurer Wayne Swan and Resources Minister Martin Ferguson said today in an-emailed statement, accepting all 98 recommendations of a review into the tax on coal and iron ore producers.
A campaign by mining companies last year forced Prime Minister Julia Gillard to water down the original tax proposed by ousted national leader Kevin Rudd. Today’s decision ends a second dispute over the tax, forecast to raise A$7.4 billion ($7.5 billion) in its first two years from 2012.
“The government supports the recommendation that all current and future royalties be credited,” the ministers said in the statement released in Canberra. “All levels of government should ensure the taxation of Australia’s resources preserves our international competitiveness.”
BHP rose 1.2 percent to A$44.71 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Rio gained 1.1 percent, while Macarthur Coal Ltd. increased 3.5 percent.
Miners including BHP, Rio and Xstrata Plc (XTA) argued that the July 2 agreement with the government included an accord to credit all future state royalties and that investment decisions had been based on that understanding. The government previously said it wouldn’t credit future royalty increases by the states.
Rio Tinto
“We note the government’s announcement and look forward to seeing the Policy Transition Group recommendations, including credit for royalties, reflected in the legislation,” Rio managing director of Australia David Peever said in an e-mailed statement. “We will follow the legislative process closely.”
BHP spokeswoman Kelly Quirke said the company remains committed to working with the government in accordance with the heads of agreement.
The review, headed by former BHP Chairman Don Argus said in December that mineral and gas royalties should be creditable against the planned Minerals Resource Rent Tax liabilities.
The Reserve Bank of Australia today highlighted gains in resource company profits in its financial stability review released in Sydney.
“On a matched sample basis, underlying profits for listed ASX 200 resources companies were around 68 percent higher in the second half of 2010 compared with the corresponding period in 2009, while profits for other non-financial companies were little changed,” the central bank said.
Earnings, Tax Proceeds
Share market analysts are forecasting resources companies’ earnings to increase by 64 per cent in the 2011 fiscal year, the bank said.
Gillard in July cut the proposed tax to a 30 percent levy on iron ore and coal profits from predecessorRudd’s 40 percent tax on all resource profits.
The proceeds from the tax will reduce the corporate tax rate for all Australian businesses to 29 percent from 30 percent, provide A$6 billion in spending for roads, rail and ports, and increase the amount paid to people’s retirement savings to 12 percent of their salary by 2020 from the current 9 percent.
To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net
To contact the editors responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net;
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