Don`t raise mining tax threshold: Henry

Raising the threshold at which miners start paying tax on their super profits would
only encourage resource companies to delay projects, the Treasury chief says.
Ken Henry has hit out at calls from the Queensland government and mining companies
for the profit level, where the tax kicks in, to be lifted.
Treasury has defined a super profit as six per cent.
It has been benchmarked against the 10-year government bond yield which is
considered a safe investment.
The Queensland government wants the super profit tax threshold level raised to 11
per cent.
But Dr Henry said in his post-budget speech that raising the profit threshold would
only encourage profitable mining companies to put off investing in new mines in the
hope they can make more money somewhere else.
"It would ... generate a significant subsidy for investment in the mining sector and
... it would create incentives for companies to delay resource production," he told
an Australian Business Economists luncheon in Sydney.
So far, the federal government has said little to defend the profit threshold, where
the 40 per cent tax would kick in.
Small Business Minister Craig Emerson declined to say if this tax threshold was up
for negotiation.
"I'm not saying that there will or will not be variations to this uplift factor," he
told Sky News.
Later, Treasurer Wayne Swan said "No" when asked if the government would raise the
threshold for the new tax.
"We said we would have generous transitional periods for existing projects, we said
we would in good faith go through a consultation process - all that is happening
right now," he told reporters in Adelaide.
The government has continued to criticise the state-based royalties regime, in which
states will be able to keep their existing royalties but the Commonwealth refunds
these payments to the companies.
So far, the government has not demanded the states scrap their schemes.
Dr Henry said smaller miners would benefit if the resource rent tax replaced
state-based royalties.
The national levy would also encourage long-term investment, he said.
"As far as mining investment is concerned, it is certainly the case that our
economic modelling for mining investment is projected to increase," he said.
Dr Henry also had a word for vocal mining companies, which are opposed to the
resource super profits tax.
"Projects which are earning super normal profits will continue to earn super normal
profits," he said.
Foreign Minister Stephen Smith said China - Australia's second biggest trading
partner - was unperturbed about the proposed resource tax.
"I'd describe it as interest rather than concern," Mr Smith told Sky News from
Shanghai.
"Of course there will be interest, but I don't believe in any way this will
adversely impact on the economic relationship that China and Australia have in the
minerals resources area."
Opposition Leader Tony Abbott told ABC Radio a coalition government would not
introduce a similar resource rent tax, even if the mining industry was open to a tax
restructure.