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Western Australia Rejects Tax Changes, Barnett Tells Australian

Oct. 30 (Bloomberg) -- Western Australia will never accept the modified mining tax Prime Minister Julia Gillard agreed with the nation’s biggest miners, the state’s Liberal Premier Colin Barnett told the Australian newspaper in an interview.

“What we’ve seen in the last year or so is that Western Australia almost feels under siege,” Barnett said. “I don’t think that much of the rest of Australia, including the federal bureaucracy, understands this state or what’s happening here.”

The 30 percent tax on the profit of core and iron ore mines will result in BHP Billiton Ltd., the world’s largest mining company, Rio Tinto Group, the third biggest, and other producers paying an extra A$10.5 billion ($10.3 billion) tax in the first two years, the government estimates.

Western Australia is the world’s largest export region for iron ore, and the location for BHP and Rio’s ore mines in Australia. About A$7 billion of estimated tax revenue is expected to come from the state.

Companies are now considering walking away from the accord Australia’s biggest miners agreed with Gillard in July after the government said last month that future increases in state mining royalties wouldn’t be offset by cuts to the federal levy.

Barnett said Western Australia will never surrender power over royalties to the federal government. “The only people who can reach agreement on royalties are state governments,” he told the Australian. “Julia Gillard cannot deliver on any commitment for state royalties not to increase.”

The state has refused to give up a third of its sales tax that the federal government’s health-care overhaul plan calls for. Health Minister Nicola Roxon said the changes will proceed without the backing of Western Australia, the Australian reported Oct. 25.

The A$356 million Western Australia would forfeit over four years by not cooperating accounts for the cost of running the state’s health system for five days, Barnett said in the interview.

Gillard’s federal Labor government hadn’t acted on proposed compromises on the issues and recent talks with the prime minister didn’t amount to any “meaningful discussions,” he said, according to today’s report.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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