Australia's mining tax moves ahead

CANBERRA, Australia, Nov. 23 (UPI) -- Australia's controversial mining tax narrowly squeezed through Parliament's House of Representatives Wednesday and is expected to be passed by the Senate early next year.

The mineral resources rent tax, slated to start in July 2012, will raise billions of dollars, to be spent on pensions, tax cuts for small businesses and on infrastructure projects, the government says.

The measure was approved on a 73-71 House vote, with the Greens supporting the government to provide enough votes for passage. A similar alignment would allow for approval in the Senate, where the government and the Greens together form a majority.

The legislative action comes two weeks after Australia's landmark carbon price legislation was passed. Similar initiatives led to the ouster in June 2010 of Prime Minister Julia Gillard's predecessor Kevin Rudd, whose original 40 percent MRRT was fiercely opposed by miners.

The MRRT applies to all new and existing iron ore and coal projects, affecting about 30 of the country's biggest miners, including global miners BHP Billiton, Rio Tinto and Xstrata, which struck a deal with the government in July 2010.

Australia is the world's largest exporter of coal and iron ore.

The package includes a 30 percent minerals resource rent tax that will apply to iron ore and coal miners recording annual profits of more $74 million but the tax will have an effective rate of 22.5 percent when special concessions are taken into account.

Small miners had wanted the profit threshold to be lifted to $500 million.

"We know Australia's resources boom won't last forever," said Gillard. "That's why the government is committed to ensuring the Australian community receives a fair return from the mining boom and that we can lock in the gains for generations to come."

Fortescue Metals Group said the passing of the MRRT would be the worst possible decision by any Australian government against the country's mining sector.

"From the moment the Rudd government proposed the initial version of the tax in May last year, Australia's high sovereign reputation for international mining investors has been compromised," Fortescue Chief Financial Officer Stephen Pearce said in a statement.

"The carnage of this tax is already clear to see," Pearce said, noting that "it has pitted big miners against small, it is discriminatory toward junior producers and it only impacts on iron ore and coal."

As the legislation was introduced into Parliament, Assistant Treasurer Bill Shorten, noting that Australia's mining profits have increased 262 percent in the last decade, said that a large share of those profits have been "shipped off overseas" along with the country's massive coal and iron ore exports.