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Australia's mining 'super tax' in doubt

Sydney - Australia's fragile minority government on Wednesday tabled legislation for a controversial "super tax" on the country's mining boom, as a crucial lawmaker held out on supporting the reform.

The government initially wanted a 40% tax on all extraordinary profits generated by resources firms as the nation enjoys unprecedented demand, mostly from Asia, for its vast mineral deposits.

But this was scrapped in favour of a 30% tax exclusively on iron ore and coal super profits after a furious and intense campaign from the powerful and wealthy mining industry.

Introducing the Minerals Resource Rent Tax (MRRT) to parliament, Assistant Treasurer Bill Shorten said the mining boom would not last forever and the government needed to spread the benefits "while the sun is shining".

"No reform is easy and this one has been very difficult," he said.

"This is the right reform at the right time... This landmark legislation is part of a reform package that will build and strengthen our economy."

But independent MP Tony Windsor, one of several minority lawmakers whose support is critical to the coalition government led by Prime Minister Julia Gillard passing the legislation, has put conditions on backing the tax.

Fracking concerns

Windsor reportedly wants the government to fund multi-million dollar scientific studies on the environmental impact of coal seam gas (CSG) mining on farm land.

CSG mining is facing a growing community backlash in Australia over concerns about its controversial extraction process known as fracking, which uses a high-pressure cocktail of water and chemicals to free the gas from the rock bed.

Farmers fear contamination of underground water tables and irreversible damage to the land, though the industry insists fracking is safe.

The government has said it will keep talking to Windsor and other crossbenchers to obtain passage of the bill on the tax which will apply to the extraordinary profits of major miners from July 1 2012.

The MRRT would apply to companies' profits whenever they rise more than seven percentage points above Australia's long-term government bond rate.

Miners would get generous tax deductions and mining projects will also be eligible for a 25% extraction allowance, which would reduce the effective tax rate to 22.5%.

Australia first announced plans for a mining super tax in May 2010 but the idea enraged the industry, triggering a backlash that led to the downfall of then-prime minister Kevin Rudd.

The government plans to use revenue raised from the mining tax to fund tax breaks for small business and corporates, increase compulsory pensions and improve regional infrastructure.

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