Rio Tinto, BHP give in to Australia’s mining tax

Mining giant, Rio Tinto after making its first payment under the Gillard government's mining tax, says it continues to engage in ''very high-level'' discussions with the Australian Tax Office over whether it had been correctly calculating its obligations during the first nine months of the controversial tax.

Officials from Rio and BHP Billiton told a senate inquiry the companies had paid mining tax for the March quarter, ensuring that the total amount raised by the tax would exceed the $126 million that was raised in the six months to 31 December.

According to the companies, market disclosure rules would temporarily prevent them from revealing the exact amount they had paid, but it was believed the sums involved would hardly do anything to offset the $12-billion collapse in company tax revenues that prime minister Julia Gillard revealed yesterday.

That collapse in company tax had widened a budget hole that was started by the mining tax, which had had its revenue targets downgraded several times since it came into effect in 2010.

The most recent revenue forecast of $2 billion this financial year seemed to be unrealistic, with large companies like Fortescue Metals and Xstrata avoiding payments on the back of lower commodity prices and deductions for state royalties as also prior infrastructure investments.

According to Minerals Council of Australia boss Mitch Hooke, he feared the mining industry could now be targeted by the government in search for further budget savings, particularly on existing tax concessions for diesel consumption and exploration.

BHP had earlier confirmed payment of $77 million in mining tax in the six months to 31 December however, the March quarter payment was Rio's first payment under the tax.

The first half of the financial year had seen only $126 million in mining tax paid to the Gillard government, which was well below the $2 billion that was expected by the government.

The meagre returns from the mining tax had helped belie the Gillard government's original hopes of delivering a budget surplus this year.

The prime minister warned that "urgent and grave decisions" would need to be made to the budget papers that would be released in two weeks time.

Warning that all sectors of society - business, families and institutions - would have to face spending cuts at the budget, she said all reasonable options were on the table.