Climate expert calls for changes to mining tax

MELBOURNE: Ross Garnaut, the Australian Government's adviser on climate change, called for changes to the planned 40 per cent tax on resource companies like BHP Billiton and Rio Tinto Group to maintain the industry's growth.

Garnaut, who designed the Government's emissions trading plan, said the tax should be changed to become "neutral", guaranteeing stability for investors and companies. It should allow for offsetting exploration losses and changes needed to be made in how it was applied to development and production, he said.

"The new arrangements would have good prospects for future stability," Garnaut said. "They would be consistent with healthy growth in the resources industry in the period of great opportunity that lies ahead."

The proposed resource levy, included in the Government's response to Treasury Secretary Ken Henry's taxation review, is scheduled to start in 2012 and may reap A$12 billion ($14.8 billion) in its first two years. Prime Minister Kevin Rudd has clashed with mining companies that help make up 9 per cent of the Australian economy.

Treasurer Wayne Swan, who has accused miners of waging a fear campaign against the tax, was meeting Queensland Premier Anna Bligh yesterday. BHP was also scheduled to see Treasury officials in Canberra yesterday after Rio managing director for Australia David Peever met the officials on Thursday.

"The resources industries are responding to the Henry review and the Government's proposal with concerted pressure and noise, but not yet with analytical statements" said Garnaut, who is also chairman of Lihir Gold, the second-largest gold mining company on the Australian stock exchange. "We cannot continue the debate with slogans."

Peever said on Thursday the Treasury consultation was too narrow and that Rio would review "all of our investment decisions" while it analysed the taxation. He met the Treasury panel for 2 hours.

BHP, the world's largest mining company, has also said it is reviewing projects in Australia.

The tax might reduce earnings at Melbourne-based BHP by 17 per cent and Rio by 21 per cent in 2013, UBS said in a May 3 report. BHP's net income in the year ended June 30 was US$5.9 billion ($8.8 billion) while Rio earned US$4.9 billion in 2009.

Australia is the world's biggest exporter of iron ore, coal and alumina, and demand for resources from China and India helped the country's A$1.2 trillion economy skirt recession during the global financial crisis.

"This is a dangerous time for a country in a dangerous world," said Garnaut. "Australia for the moment is faring better in the aftermath of the great crash of 2008 than other rich countries."

- BLOOMBERG