UPDATE 1-Australia unveils mining tax in pre-election shakeup

* Australia to impose 40 pct new tax on mining

* Miners say plan will destroy value, slow investment

* Australia to boost worker pension-fund savings

By James Grubel

CANBERRA, May 2 (BestGrowthStock) – Australia’s government angered
its booming resources sector on Sunday by unveiling a new tax
on mining projects from July 2012 under a sweeping pre-election
tax overhaul which will also boost pension savings for workers.

The government will also cut the company tax rate from 30
percent to 29 percent from mid 2013 and to 28 percent by mid
2014, and will refund state-based royalties currently imposed
on mining projects.

The new 40 percent Resource Super Profits Tax will hit big
miners such as BHP Billiton, (BHP.AX: ) (BLT.L: ), Rio Tinto
(RIO.AX: ) (RIO.L: ) and Xstrata (XTA.L: ) and is set to raise about
A$12 billion ($11 billion) in its first two years.

“If implemented, these proposals seriously threaten
Australia’s competitiveness, jeopardise future investments and
will adversely impact the future wealth and standard of living
of all Australians,” BHP Billiton chief executive Marius
Kloppers said in a statement.

Kloppers said the changes would increase the groups
effective tax rate on Australian earnings to 57 percent from
the current rate of around 43 percent.

Investment bank UBS said predicted a sell-of of Australian
mining stocks on Monday as investors digested changes, which
could also send a chill through mining mergers and

“I think it’s clearly negative for the big miners. I expect
them to be down fairly materially,” UBS chief strategist David
Cassidy said.

Treasurer Wayne Swan said the government expected strong
opposition to its plan, from both the resources industry and
conservative opposition parties, and would now consult miners
on details of the new tax.

“We are under no illusions about how difficult it will be
to win support for this package,” he said, adding support would
never be unanimous.


For analyst reaction to the plan, click on [ID:nSGE641009]

For a snap analysis on the plan, click on [ID:nSGE641008]

For highlights of the plan, click on [ID:nCBR000041]

For a factbox on reforms rejected, click on [ID:nCBR000042]


Swan said the new tax would help all Australians share the
benefits of a prolonged mining boom, fuelled by demand from
China and India, which helped Australia avoid recession during
the global financial crisis.

Australia faces elections in the second half of 2010, most
likely in October, with Prime Minister Kevin Rudd ahead in
opinion polls and seeking to win a second term in office.

The government says the changes will lay the base for a
10-year reform programme and won’t seek to legislate for them
until after the next election, when it could still face stiff
opposition from a hostile upper house.

Conservative opposition leader Tony Abbott said he was
strongly opposed to the new mining tax, which he likened to the
government’s shelved emissions trading scheme (ETS).

“I am deeply, profoundly hostile to the idea of a great big
new tax, like the ETS, on the most important and productive
part of the economy,” Abbott told reporters, without confirming
whether he would try to vote down any changes.


With an election due within six months, the government also
announced an increase in employer-paid pension fund
contributions for workers, to 12 percent from the current 9
percent by 2019-20, boosting Australia’s A$1.2 trillion
retirement savings pool, the world’s fourth-largest.

The contributions will rise by 0.25 points in 2013-14 and
in 2014-15, then by 0.5 percent a year until reaching 12
percent, Swan said, sending an extra A$85 billion surging into
retirement savings over 10 years.

The government will also contribute A$500 a year to
pension-fund savings for low-paid workers. Older workers would
receive a low tax rate on contributions up to A$50,000 a year,
up from a A$25,000 cap now.

Swan said the pension fund industry would swell by A$500
billion by 2035, fuelled by the changes.

The reforms will be welcomed by the funds industry,
including big firms such as AMP (AMP.AX: ) and Axa Asia Pacific
(AXA.AX: ) (AXAF.PA: ), as well as major banks that run large funds
businesses, such as Commonwealth Bank of Australia (CBA.AX: ).

Swan denied the new mining tax would discourage investment,
and said governments had only received about A$9 billion extra
from resource charges over the past 10 years, while resource
profits were A$80 billion higher.

To further allay mining concerns, Swan said Australia would
now also give mining companies a tax rebate to offset the cost
of resource exploration from July 2011, in a move it said would
benefit 4,300 companies.

The government will also set up an infrastructure fund,
with an initial payment of A$700 million from 2012-13, to help
pay for roads, ports, railways and utilities for resource

Rudd told reporters the tax changes would help stimulate
and expand the mining industry, quoting independent modelling
as finding that the mining activity would grow 5.5 percent over
5-10 years.

Stock Market Today

(Editing by Mark Bendeich and Rob Taylor)

UPDATE 1-Australia unveils mining tax in pre-election shakeup