Australia ended a damaging dispute with global miners today by dumping its planned "super profits" tax for a lower resources rent tax backed by big miners, clearing a major hurdle to calling an early election.
The deal looks positive for miners and the government.
Although miners will pay more tax, the total will be less than under the proposed "super profits" tax - A$1.5 billion by government estimates - and the government still gets extra revenue to fulfil pre-election promises.
"We were determined to get a fairer share of the mineral wealth in our ground for all Australians," prime minister Julia Gillard said in announcing the new profit-based tax.
The Australian dollar jumped nearly half a US cent on the news, while shares rose 1 per cent early with BHP Billiton and Rio Tinto up around 2 percent, before turning flat on global economic worries.
But the tax deal must still be passed by the next parliament, following an election expected within months, with opposition parties vowing to oppose the tax and scrap it if they win office.
Ms Gillard has resurrected the Labor government's flagging popularity with voters since her appointment last week. She is now on track for a narrow victory in an election.
"The government wants a new tax, the coalition doesn't, it's as simple as that, said Tony Abbott, leader of the Liberal-National conservative coalition.
"You are going to have to change the government to dump the tax, if Australia's prosperity is to be preserved."
Global miners BHP Billiton, Rio Tinto and Xstrata welcomed the new tax, but not all miners were happy, saying the deal still threatened Australia's resources sector and overseas investment.
"New taxes of any scale don't help create jobs or stimulate overseas investment in Australia's resource sector. We still have an issue of sovereign risk," said mining magnate Clive Palmer.
The new Minerals Resource Rent Tax will apply only to iron ore and coal projects, while a Petroleum Resource Rent Tax, currently applicable to offshore oil and gas projects, will be extended to onshore oil and gas projects, Gillard said.
The resource rent tax will be at a rate of 30 per cent, down from the previous "super profits" tax rate of 40 per cent, and the trigger point for the tax will be higher, at the 10-year bond rate plus 7 per cent, currently at around 12 percent, of return on capital.
The petroleum tax rate will be unchanged at 40 per cent.
The new resources rent tax will apply from July 1st, 2012, as earlier proposed for the "super profits" tax.
Reuters