By James Grubel
CANBERRA (Reuters) - Australia's government is set to pass laws for its 30 percent mining profits tax later this week after agreeing to lift the starting threshold and promising more scrutiny of coal seam gas projects in a deal to win support from three key independents.
But the changes, which will cost about A$20 million a year in lost government revenue, have upset the Greens, whose support is needed to pass the laws, and done little to allay concerns of small and mid-tier mining companies.
Under the agreement with independent lawmaker Andrew Wilkie, the government will lift the starting profits threshold for the tax from A$50 million to A$75 million, although smaller iron ore miner BC Iron said the changes would give no relief to smaller companies.
"It's like painting that house full of termites" BC Iron Chief Executive Mike Young said. "To put A$75 million into context, at current iron prices, that's our margin on maybe 1.2 million tonnes."
Gillard's government, which holds a one-seat majority with support from one Green and the three independent lawmakers, wants the mining tax passed by the lower House of Representatives by the end of the week.
The government wants the tax on iron ore and coal mine profits, due to start in July 2012, to raise about A$7.7 billion in its first two years, and Treasurer Wayne Swan said the changes meant the biggest miners would pay the most.
"Most of this money will now be paid by the largest miners in this country," Swan told parliament.
A government deal with two other independents, Tony Windsor and Rob Oakeshott, earmarks A$200 million over five years for scientific research into coal seam gas projects, to allow governments to better assess the impact on water and farming.
GREENS WARY
The government wants to slap the proposed tax on big iron ore and coal miners as part of reforms designed to balance its budget and reallocate wealth from the mining industry, now enjoying the biggest boom in a century, to other sectors.
The government and global miners BHP Billiton, Rio Tinto and Xstrata agreed on the mining tax in 2010, but smaller miners such as Australia's Fortescue Metals Group have complained that the tax favours big miners.
But Simon Bennison, chief executive of the Association of Mining and Exploration Companies, said his group will continue to push for the tax to be based on a production threshold instead of a profit threshold.
Bennison said 10 million tonnes per year would be a good starting point.
"Iron ore prices are not going to stay at high levels forever, they have already fallen quite a lot and the profitability levels of companies are all different," he said.
The mining tax will help the government return the budget to surplus and fund a 1 percentage point cut in the company tax rate to 29 percent, portrayed as a boost for non-mining sectors, especially those hit hard by a strong local currency.
But the Greens, who want the tax rate to be lifted to 40 percent and for the tax to also apply to uranium and gold mines, said they now wanted to be sure the government did not cut other areas of the budget to fund Wilkie's amendments.
"We are going to ensure that the public interest be upheld here. We will be talking to the government in the coming day or two," Greens leader Bob Brown told reporters.
The government needs the Greens to pass the mining tax through parliament's Senate upper house, where a vote is due in early 2012.
(Additional reporting by Rob Taylor and James Regan in Sydney; Editing by Ed Davies and Ron Popeski)
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