Anna Bligh backs big miners on tax deal

ANNA Bligh has backed big mining's take on the deal Julia Gillard cut to make peace over the federal mining tax.

ANNA Bligh has backed big mining's take on the deal Julia Gillard cut to make peace over the federal mining tax.

The Queensland Premier said a bitterly contested provision allowing the miners to offset state royalties should cover future increases in them.

Her declaration yesterday, that "royalty means it's royalty now, and royalty into the future", puts her at odds with Treasury boss Ken Henry and, potentially, the Prime Minister if the federal government reneges on allowing mining companies to credit state royalty payments against the new mineral resources rent tax.

At the same time, the Queensland Premier has put the industry on notice that the states will reserve the right to lift their royalty take, regardless of any federal deal on the MRRT.

Ms Bligh's stand will intensify concern among the miners that they face a twin-pronged tax grab from Canberra and the states should the federal government backtrack and limit the concession on state royalties to existing charges, leaving them to pay the difference on any future state royalty increases on top of the MRRT.

Another front in the escalating dispute opened up yesterday when the miners warned that Aboriginal communities could lose out on native title payments unless the Gillard government exempted the arrangements from its proposed mining tax.

The deal on the MRRT was hammered out by Ms Gillard, in one of her first acts as Prime Minister, to end the debilitating advertising war bankrolled by big miners outraged by the ill-fated resource super-profits tax proposed by Wayne Swan and backed by Kevin Rudd.

This proved to be the last straw for Mr Rudd's leadership, and was threatening to sink Labor at the federal election last August when a newly elevated Ms Gillard intervened.

The Weekend Australian reported on Saturday that the miners were now preparing to resume their advertising blitz against the government in the belief they had been double-crossed on being allowed to offset "all" state royalties against the MRRT.

Dr Henry last month told the parliamentary tax review committee that while the heads of agreement on the MRRT signed by Ms Gillard and the big three miners - BHP Billiton, Rio Tinto and Xstrata - did refer to "all royalties", it did not explicitly say it would cover "all future royalties".

Miners are increasingly jittery that this is actually the government's position, exposing them to taxing from the state beyond the scope of the MRRT deal.

Ms Bligh emphasised yesterday that Queensland was not a party to the deal, and would reserve the right to increase state royalties regardless of what the miners had agreed to with Canberra. She said she was in accord with Western Australia Premier Colin Barnett on this.

"I think if you read the heads of agreement, it is open to interpretation that royalties mean royalties, wherever you are paying them," she told The Australian.

Pressed on her interpretation of whether the deal covered only existing state royalties or extended to increases down the track, she said: "Queensland's understanding of the word royalty means it's royalty now, and royalty into the future."

Ms Bligh said the issue was a "semantic" one, as far as Queensland was concerned, between the miners and the federal government. The resource state had increased its coal royalty from 7.5 per cent to 10 per cent in 2008, bringing it into line with the state tax on other minerals, and any further rises would be years off.

"A democratically elected Queensland government in five, 10, maybe 15 years may decide to lift royalties, and if they do so, and then there is a gap in the arrangements, that is a matter for the mining companies and the federal government," she said.

Tony Abbott said the reports in The Weekend Australian were "just another case of the Prime Minister saying one thing before the election and doing something quite different after". "I can understand, first, why the big mining companies feel dudded, second why there is considerable resentment inside the Gillard cabinet at the way this matter has been handled by the Treasurer and by the Prime Minister.

"Now of course they're desperate for the revenue, that's why they're breaking promises."

But Assistant Treasurer Bill Shorten said the mining tax remained critical to funding planned superannuation reforms. "We will land the mining tax. That will occur next year and we are completely committed to increasing the adequacy of people's retirement income, absolutely," he told Sky News's Australian Agenda.

"The mining tax is the absolutely best way to help fund the reforms we're making to superannuation, which will increase the adequacy of retirement payments for all Australians. We see the two as a package, and I'm completely confident that we'll land the mining tax next year."

Liberal frontbencher and chairman of the mining tax inquiry, Mathias Cormann, accused Ms Gillard of trying to "welsh" on a written agreement with the three big miners she used to solve the mining dispute before the election.

"Before the election Julia Gillard was desperate to get a deal with the big miners, so she was quick to put her signature as the Prime Minister of Australia on that dotted line," Senator Cormann said.

"After the election she has been as quick in her attempts to welsh on a key part of that deal. Julia Gillard signed a mining tax heads of agreement which clearly states that all state and territory royalties will be creditable against the resources tax liability. Clearly 'all' means 'all' - there was no qualification. Either the Prime Minister didn't understand the deal - but signed the document anyway - or she is welshing on a deal after the election which delivered her great political benefit before the election."

Referring to reports of cabinet divisions over the RSPT revealed in The Weekend Australian, Senator Cormann said: "The bottom line is that this is a bad tax which was developed through a very bad process.

"The RSPT process was flawed, but the MRRT process where the government negotiated a tax design in secret with three taxpayers . . . is also breathtakingly flawed.

"The big three have learnt that they can't trust the commitments made by this government when facing a difficult election."