20 Mar 2012

30% tax on mining becomes law in Australia

8:01 pm on 20 March 2012

The Australian senate has pushed through into law a controversial 30% tax on iron ore and coal mining companies.

The tax will raise $13.6 billion over three years from major companies like BHP Billiton, Rio Tinto and Xtrata, who have been profiting from a resource boom driven by strong demand for raw materials from China and India.

The tax, which is aimed at distributing the benefits of that revenue to other segments of the economy, comes into effect on 1 July.

"This important reform will provide a revenue stream to ensure that businesses in particular that are not in the fast lane of the resources boom get some tax relief," Treasurer Wayne Swan told parliament.

In a success for Prime Minister Julia Gillard, the measure passed through the upper house with backing from the ruling Labor party and the Green party,

However, the conservative opposition coalition continues to oppose it, saying it will drive investment overseas and cost thousands of jobs in Australia.

Tax pegged to spending, pension promises

The government originally announced a 40% mining tax in May 2010, but that set off intense opposition from the mining companies.

That opposition was central to Labor's decision in June 2011 to replace Kevin Rudd as prime minister with Ms Gillard, who then negotiated a 30% tax with the mining giants.

The government wants to use the funds, amongst other things, to reduce Australia's company tax rate from 30% to 29%.

It also won support for the tax by promising $7.7 billion in spending on infrastructure such as roads, rail and ports and agreeing to raise the amount paid to people's retirement savings to 12% of their salary by 2020, up from the current 9%.