Government, BHP to come Face to Face on Tax Issue

It is now clear that the mining industry has really launched a campaign against a resources rent tax and it started long before the Government released the Henry Report. Macquarie and Merrill Lynch lately came up with their reports estimating the effect of the mooted 40 percent tax over the mining giant BHP Billiton (BHP). The report also shows a reduction in earnings for the miner by as much as 7.5 percent and 16 percent correspondingly. According to both these reports, the resources rent tax would be replacing state royalties, something that remains within the range of 2 percent and 10 percent. However, the offsetting reduction in company tax which surely will offset any increase in the resources is not being taken under consideration. At this point, both the reports are missing the fact as BHP along with the country as a whole would be the gainer from a reduced company tax.

The Business Council of Australia has argued for a reduction in the company tax by as much as 50% as it believes the loss of revenue is going to be more than the made up due to the improved economic activity along with additional employment and innovation since in many cases the company tax is not passed on to the customers. BHP Billiton have stated that the idea of introducing a special tax over its business should not be implemented as this can create extra pressure on the company in the competition with its Brazilian rival Vale doing business under a 34 percent company tax and 2 per cent royalties.

BHP is expected to wait until it goes through the report. However, the miner is likely to come up with a massive campaign, bigger than the one for Pilbara where it will focus on the value that it created for the nation. BHP might focus on the fact that any hit on the company could have its impacts on the superannuation savings and the Government itself may come under pressure as the investors (shareholders) are voters as well. It is to be mentioned that the tax will be considered as a major hit on BHP Billiton. And many believe that a fight is on which is being seen as a fight between the Australian corporate world and the globally recognized mining giant BHP Billiton.