PM's tough task to win votes

THE back flip on the super profits resource tax may save the Labor Government, but can the new Prime Minister deliver?

Ending the fight over the resource super profits tax (RSPT) may be at the top of Julia Gillard’s to-do list, but she has no scope to drop the tax and little scope to reduce it.

Mining and resource companies have welcomed the decision to negotiate rather than consult, but will the proposed 40 per cent tax be reduced to a lower rate or will it be scrapped altogether?

Surprisingly to some, the reason the new Prime Minister can’t drop the tax is not because it would leave a hole in the budget.

Mathematically the tax could be dropped without affecting the government’s commitment (repeated by Gillard) to have the budget back in surplus in 2012-13.

However, the Prime Minister now needs the support of the resources industry to succeed, ultimately banking her success with the miners.

A spokesperson for Rio Tinto told The Observer they are cautiously encouraged by the new prime minister’s invitation to begin full and open engagement on all aspects of tax reform.

“While it is a positive step, the Government needs to end the uncertainty affecting the Australian economy as soon as possible.”

At the height of the RSPT debate, Rio Tinto criticised the government’s tax reform and was one of the last companies to reluctantly walk through the government’s door.

“Rio Tinto has no doubt the RSPT was flawed policy and that it has already caused damage to Australia’s reputation and the national economy,” the spokesperson said.

“We look forward to the negotiations.”



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