BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc have been called to give evidence to an Australian parliamentary committee investigating the government’s planned 30 percent tax on iron ore and coal profits.
The Senate committee, which will provide recommendations next June before a vote by lawmakers, has asked BHP Chief Executive Officer Marius Kloppers, Rio’s Managing Director for Australia David Peever and Xstrata Coal CEO Peter Freyberg to give evidence, Chairman Mathias Cormann said today in Canberra.
“They will be appearing,” he said in an interview. “I’m keen for that to happen before the end of the year.”
Following pressure from mining companies, Prime Minister Julia Gillard in July watered down the tax to a 30 percent levy on iron ore and coal profits from predecessor Kevin Rudd’s 40 percent tax on all resources. Key independent lawmakers including Andrew Wilkie, who hold the balance of power in the lower house, said her current proposal may be blocked.
“The government has backed down on the weaker mining tax and now they have failed to garner the support from these key independents, so it’s embarrassing,” said Rick Kuhn, a political scientist at the Australian National University in Canberra. “The vote is not scheduled until next year, so the government still has time to save this.”
Xstrata had received the committee’s request and is determining who will attend, said spokesman James Rickards. BHP spokeswoman Amanda Buckley and Rio spokesman David Luff weren’t immediately available for comment.
“It is the right of governments to change policy parameters, for example tax regimes, and to decide if, where and when resources will be developed,” BHP Chairman Jac Nasser said at the company’s annual general meeting in Perth today. “It is important that a country’s competitiveness, and its attractiveness as an investment destination, in not negatively affected in the process.”
Gillard, Treasurer Wayne Swan and Resources Minister Martin Ferguson signed a tax agreement on July 2 with the three miners in Canberra. Mining companies and the government are still discussing how state royalties will be treated under the proposal, Ferguson said in a Nov. 10 interview. There are some questions that only the companies can answer, Cormann said.
“They are the only ones that were in the negotiations with the government,” he said. “There is now dispute on some key aspects, specifically around the treatment of royalties.”
Gillard’s Labor Party lost its majority at the August election and relies on support from four independents to pass laws. A draft mining tax law is scheduled to be released next May and introduced to parliament in the second half of 2011.
Independent Wilkie and Nationals lawmaker Tony Crook have joined Bob Katter to oppose the current tax plan and independent Rob Oakeshott said Gillard’s government could lose a parliamentary vote on the tax if it doesn’t brief lawmakers on its details.
“The longer the government refuses to provide details, more independents will drop off,” Oakeshott said in an interview yesterday. “The government has to get busy and get selling if they don’t want to see this defeated on the floor of the house.”
Even if the remaining independent Tony Windsor and Greens member Adam Bandt join Labor to support the bill, Labor wouldn’t have the 76 votes required.
“The reform of the resource tax to capture excessive mining-sector rents is welcome, but more could be done to enhance efficiency and equity,” the Organization for Economic Cooperation and Development said this week in a report. “Replacing the royalties by a well-designed resource rent tax extended to all commodities and all companies irrespective of their size would be desirable. Royalties should also be eliminated, rather than credited to Minerals Resource Rent Tax payers by the federal government.”
The Senate committee is running separately to the government’s own policy group chaired by ex-BHP chairman Don Argus. The government aims to implement the taxes from 2012.
“The Argus committee is consulting with industry over the design and implementation of the Minerals Resource Rent Tax and is scheduled to report next month,” Swan said in an e-mailed statement.
“I have always been opposed to royalties as a way of collecting taxes from the mining companies and a national tax makes much more sense,” Windsor said in an interview today. “I am waiting for the legislation to come up.”
The tax is forecast to raise A$7.4 billion ($7.3 billion) in its first two years and will pay for cutting the corporate tax rate to 29 percent, new infrastructure and to boost retirement savings for workers.
“Australia’s richest companies should pay more tax but the Resource Super Profits Tax and its replacement have been hastily and inadequately constructed,” Wilkie said in a Nov. 11 interview. “I remain to be convinced they should be supported.”
Fellow lower house lawmaker Tony Crook, who is from Western Australia state, said in an interview yesterday that the tax would unfairly penalize his home state, which generates a third of the nation’s exports and accounts for 62 percent of mineral production.
“I have campaigned strongly against the implementation of a mining tax,” said Crook, who has said he would vote as an independent despite his party affiliation with the opposition Liberal-National coalition. “A mining tax would not just affect mining companies, it will seep through in a negative way to the economy at all levels.”
Greens member Bandt supports the tax, although said he prefers Rudd’s model. The Greens, which will have control of the Senate next July, have said they will pass the legislation through the upper house.
“The Greens opposed the government cave-in on the mining boom tax, but even a modified tax is better than none,” Bandt said in a Nov. 11 interview. “We will not stand in the way of the mining tax despite its low level.”