Australia Likely to Change, Not Scrap, Mine Profit Tax, Credit Suisse Says

Jun 24, 2010 (Bloomberg) - Australia, the largest shipper of iron ore and coal, is more likely to alter than scrap a proposed mining tax after the appointment of new Prime Minister Julia Gillard, said Credit Suisse Group AG.

"The unions - who have a strong influence in this Labor government - have supported the proposed resource super profits tax and so too has the International Monetary Fund," Credit Suisse analyst Paul McTaggart said today in a report. "The IMF has (behind the scenes) been calling for developing nations to move to a RSPT type tax regime with higher taxes for mining."

The ruling Labor party yesterday dumped Kevin Rudd, the architect of the tax, for Gillard, who opened the door to talks on the proposed 40 percent tax that Morgan Stanley estimates would have taken A$85 billion ($74 billion) from the mining industry during the next decade. Treasurer Wayne Swan reaffirmed the government's commitment to a profits-based mining tax.

"The key message is that the Australian government is now open to negotiation, not only consultation, on the resource super profits tax so there appears to be room for a watering- down of its impact," McTaggart said.

BHP Billiton Ltd. and Rio Tinto Group agreed yesterday to stop advertising campaigns against the tax after Gillard ordered the cessation of the government's advertisements. That may be "a sign that we can expect more progress on the resource super profits tax issue in the coming weeks," McTaggart said.