Replies to post #5718 on Alloy Steel Inc. (fka AYSI)

[Knowledge is King]

Here's a good article; tax not nearly dead


Australia Mining Tax Battle Truce Unlikely To Last


By Alex Wilson and David Fickling
Of DOW JONES NEWSWIRES

MELBOURNE (Dow Jones)--New Australian Prime Minister Julia Gillard has for
now taken some of the heat out of the government's bitter battle with the
mining industry over a planned new mining tax, but a resumption of
hostilities looks inevitable.
Both sides have agreed to suspend their advertising attacks on each other as
Gillard promises genuine negotiations and her offer of an open door has been
welcomed by the industry.
However, the government's renewal of its commitment to bring the budget into
surplus in 2013, a feat that relies on the windfall from the new tax unless
it goes back on other promised policy initiatives, has raised questions
about how much ground the new prime minister is actually willing to give.
Skeptical miners also note that with Treasurer Wayne Swan, an architect and
chief promoter of the tax, not only keeping his position but also being
promoted to deputy prime minister, there is no guarantee that Gillard's
ascendancy will lead to significant changes to the tax plan.
The hostile standoff with mining companies since the tax plan was announced
in May was one of the issues that eroded support for former Prime Minister
Kevin Rudd, who on Thursday was unceremoniously dumped by his party in
favour of Gillard.
She will be under pressure to neutralize the issue and was claiming an early
win after mining companies agreed to her request that they suspend their
attack ads against the tax.
"Already we are seeing our goodwill reciprocated," she said in her first
address to Parliament. "This does give me confidence that there is room for
negotiation, there is an ability to work together in the spirit of
goodwill."
Mining company executives said they welcome the opportunity for genuine
engagement on the tax.
"We are encouraged by the comments of new Prime Minister Julia Gillard, that
her government will open the doors for negotiation with the objective of
achieving consensus," a BHP Billiton Ltd. (BHP.AU) spokeswoman said after
the company cancelled its advertising program.
Rio Tinto Ltd. (RTP) said it has also suspended its advertising campaign
against the tax and welcomed Gillard's invitation to engage in talks on the
tax.
"While it is a positive first step, we need to end the uncertainty affecting
the Australian economy as soon as possible," a Rio Tinto spokesman said.
Industry lobby group, Minerals Council of Australia, has also halted its
advertising campaign against the tax and has agreed to accept Gillard's
offer.
Minerals Council Chief Executive Mitch Hooke said the decision was "a
gesture of goodwill in the expectation that consultations will be meaningful
and constructive."
Fortescue Metals Group Ltd. (FMG.AU) Chief Executive Andrew Forrest welcomed
Gillard's appointment, and said he was confident the negotiations could
result in a tax regime more attractive to international investors.
"I feel personally that with Julia and Wayne, the original form of that tax
is now off the table and we can look at something sensible," Forrest said at
a media conference in Perth.
Forrest, one of Australia's richest men and founder of Fortescue, the
largest Australian iron ore producer after global giants BHP and Rio Tinto
Ltd. (RIO.AU), has hitherto been a vocal critic of the proposed tax and its
potential impact on the growth of the Australian mining industry.
Ian Smith, chief executive of Australia's biggest gold producer Newcrest
Mining Ltd. (NCM.AU), added his voice to the newly optimistic mining
industry chorus, and said the company stands willing to negotiate and that
the signals from the new prime minister are positive.
Despite the early pleasantries, however, the two sides are still a long way
apart and it isn't hard to find deep skepticism in the mining industry about
the government's willingness to compromise.
Minerals Council's Hooke said at a meeting in Melbourne that any new talks
would need to address all of the key issues the mining industry has raised,
including the 40% rate of the tax, its retrospectivity and its impact on
Australia's international competitiveness.
But Gillard made it clear soon after taking charge that she still believes
miners should be paying more tax.
A senior union official told Dow Jones Newswires he has been advised the
tax will remain, although in what form remains unclear. "There will still be
a super profit tax," the official said.
A person close to one of Australia's biggest mining companies said Gillard
has more room to back down on the tax or to announce a wide ranging review
of it, but that there was no guarantee that she would do so, especially with
Swan as her treasurer.
"The miners see it as potentially a circuit breaker but one that is not
automatic, and they will be very wary," the person said.
Tony Sage, executive chairman of Cape Lambert Resources Ltd. (CFE.AU), said
he expected the new leadership team of Gillard and Swan to be wedded to the
tax.
"Wayne Swan is the architect of this tax and he has been virulently opposed
to any compromise, so it would be a big back-down for him personally.
Gillard is from the left and was never a favorite of the mining industry,"
he said.
However, the Minerals Council's Hooke said the industry had strong respect
for Swan and Resources Minister Martin Ferguson, who will be carrying out
the negotiations.
A mining analyst at an international bank in Sydney added that the tax was
too important to the government's plans to close its budget deficit by
2012-2013 to be lightly sacrificed.
"You'd have to be extremely brave to assume it wouldn't continue in some
form," he said, speaking anonymously because his views didn't represent
those of the bank.
In its budget papers released last month, the government estimated it would
raise A$3 billion from the tax in 2012-2013 and A$9 billion the following
year.
The complex resource super profits tax would be levied at a rate of 40% on
all profits from mining projects above a rate of return of about 6%.
Kevin Rudd and Wayne Swan said repeatedly that the 40% rate of the tax
wasn't up for negotiation but had never ruled out raising the threshold at
which the tax kicked in.
Miners were furious that they weren't consulted before the tax was announced
and factored into future government revenue, and that many of their key
complaints against the tax had been ruled off limits in subsequent
consultations with a government which then set about attacking their
contribution to the nation.
Gillard is yet to outline what is now up for discussion or how she plans to
meet budget forecasts if the tax is amended.
Until she does, there is no guarantee that the combatants in this long
running saga won't take up arms again in a battle that could once more flare
up as a damaging issue for the government.

-By Alex Wilson, Dow Jones Newswires: 613-9292-2094;
[e-mail]

(Bill Lindsay in Sydney also contributed to this article.)