(July 2, 2010)

THE Government will take a projected $1.5 billion cut in revenue after agreeing to reduce the resource super profit tax from 40 per cent to 30 per cent.

Prime Minister Julia Gillard has also agreed to water down other key aspects of the tax, which will affect about 320 companies compared to 2500 flagged in the original deal.

Shares in mining companies jumped in early trade after the deal was announced.

Meanwhile, mining company Xstrata said it would resume a key project that it suspended after the announcement of the resources super profits tax. The company is listed on the London and Swiss stock exchanges.

BHP Billiton, Rio Tinto and Xstrata all welcomed the mining deal in a joint statement this morning.

We didn't back down - Gillard

The new tax - called the minerals resource rent tax - will be placed on companies involved in mining iron ore and coal.

Ms Gillard denied the Government had backed down in the face of an aggressive public relations campaign from the mining industry.

She said the deal, signed last night, assured that "Australia gets a fair share for its non-renewable resources", adding that "we've been stuck on this question as a nation for too long".

Despite the expected drop in tax revenues of $1.5 billion, Ms Gillard said Australia remained "on course to return to surplus at 2013".

She also noted the tax deal would lead to sustained investment in infrastructure, strengthen the national economy in the future, and enable Australian businesses to grow and promote investment in jobs.

In another major concession, the tax will apply from a much higher rate than originally planned 10-year Commonwealth bond yield.

The new cut-in rate has been adjusted to the long-term bond rate plus seven per cent - an approximate rate of about 12 per cent.

The current petroleum resource rent tax will be extended to all onshore and offshore oil, gas and coal seam methane projects.

Other commodities will not be included in the tax regime.

Revised tax to hit bottom line

The new measures come at a cost, attracting $1.5 billion less in revenue than the planned resource super profits tax.

To offset the lost revenue from the new mining tax agreement, the Government will cut the company tax rate to 29 per cent from 2013/14.

Small companies will still benefit from an early cut to the company tax rate to 29 per cent from 2012/13.

A planned lift in compulsory superannuation contributions - from 9 per cent to 12 per cent by 2020 - remains unaffected.

"The breakthrough agreement keeps faith with our central goal from day one: to deliver a better return for the Australian people for the resources they own and which can only be dug up once," Ms Gillard said.

"It is the result of intense consultation and negotiation with the resources industry.

"We believe these improved reforms offer the best chance of delivering for hard-working families and small businesses around Australia while protecting and growing our great mining industry.

"All along, our objective has been to deliver Australians a better return for the resources they own, which can only be extracted once, and this plan will deliver on that commitment."

Ms Gillard's predecessor, Kevin Rudd, caused major controversy when he announced the super tax - and many speculated it was one of the policies that lead to his recent downfall.

Companies will be penalised - Opposition

The Federal Opposition said hundreds of companies could be at risk of being penalised and claimed the revised tax would also spook international investors.

"This is a bad tax," Opposition resources spokesman Ian Macfarlane said.

"It sends a bad message to the international investment community.

"And while ever this tax is in place, every time the Labor Party runs out of money, they will simply change the parameters of the scheme.

"They will change the exclusions to bring more companies in. They will use this as a milking cow going forward.

"Once this tax is in place, the parameters can be changed and the message that that sends internationally is Australia is now a very risky place to do business."

Mr Macfarlane said overseas investors were "just bewildered and frightened now about investing in Australia...They will simply take their money elsewhere".

（Source: news.com.au）