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The Globe and Mail

Australia imposes mining tax after two-year battle

Australian Prime Minister Julia Gillard.

DANIEL MUNOZ/DANIEL MUNOZ/REUTERS

Australia's parliament passed laws for a new 30 per cent tax on iron ore and coal mine profits on Monday after a bruising two-year battle with mining companies, in a major victory for Prime Minister Julia Gillard and her struggling minority government.

The tax will affect about 30 companies, including global miners BHP Billiton Ltd. , Rio Tinto Ltd. and Xstrata PLC , and aims to raise about A$10.6-billion ($11.2-billion U.S.) in its first three years.

"This is indeed an historic day for economic reform, and an historic day for a fair go in Australia," Treasurer Wayne Swan told parliament.

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The tax, which is being closely watched by other resource-rich countries, is designed to spread the benefits of Australia's resources boom to other sections of the economy by funding a cut in the company tax rate, higher payments into pension funds, and A$6-billion of infrastructure spending.

The bills also include measures to lift gradually compulsory employer payments into worker pension funds from nine per cent to 12 per cent by mid-2019.

The laws passed through the upper house Senate with support from the Greens, who unsuccessfully tried to increase the tax rate to 40 per cent and extend it to gold and uranium miners.

The Association of Mining and Exploration Companies, which represents small and mid-tier miners, condemned the tax.

"The tax is simply unfair to smaller emerging miners, and is so complex that the administrative and compliance burden on industry and government will be extreme," association chief executive Simon Bennison said.

"The introduction of this anti-competitive legislation in Australia will only further push investment capital offshore, and change our reputation as a safe place in which to invest."

The government announced the original mining tax in May 2010, sparking an angry reaction from miners who ran an advertising campaign against it.

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Opposition to the original 40 per cent mining tax played a key role in the ruling Labor Party's June 2010 decision to dump Kevin Rudd as prime minister and replace him with Ms. Gillard.

Ms. Gillard negotiated the 30 per cent mining tax with BHP Billiton, Rio Tinto and Xstrata, but without agreement from Australian miners such as Forestcue Metals Group, Atlas Iron and BC Iron.

Ms. Gillard then almost lost the 2010 national elections, but held on to power by one seat by forming a minority government with support from the Greens and two independent members of parliament.

The next election is due in late 2013, but opinion polls show Gillard's government well behind the opposition, which has promised to scrap the tax if it wins office.

But Treasurer Swan, who has run a campaign criticizing Australia's biggest mining magnates, has said Australians support the mining tax.

The mining tax policy victory follows parliament's endorsement of a controversial carbon tax, and laws to force global tobacco companies to use plain packages for cigarettes.

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