Resolution to tax impasse forecast
THE resources tax standoff between the Gillard government and miners could be resolved today ultimately leaving many Gladstone investors breathing a sigh of relief.
Since Tuesday, BHP Billiton, Rio Tinto and Xstrata have all been in talks with the Deputy Prime Minister Wayne Swan and Resource Minister Martin Ferguson.
All three of the mining giants have investments in the Gladstone region and all agree with the government on key elements of a new resources tax structure, including the creation of a new trigger point for the imposition of the tax, set at the 10-year Commonwealth bond yield plus 7 per cent.
The proposed new trigger point for the resources tax to kick in is currently equal to a rate of about 12 per cent, about the average cost of capital in the mining industry.
The original tax cut in above the bond yield only, currently just over about 5 per cent.
In another backflip, the government has conceded that the miners can now inject their existing assets into the revised tax regime at market value.
Both Rio Tinto and Xstrata told The Observer yesterday that negotiations were proceeding with an announcement expected today.
In what could be a winning deal, an announcement is expected that the coal seam gas (CSG) and liquefied natural gas (LNG) industry will be exempt from the controversial mining super profits tax.
The sector is expected to be taxed under terms similar to the current petroleum resource rent tax, which has a much higher threshold and allows for companies to cover their full capital costs before paying the tax.
The LNG prospectors have made no comment on the expected deal, but said they are participating in the consultation process.