Australia's government angered its booming resources sector on Sunday by unveiling a new tax on mining projects from July 2012 under a sweeping pre-election tax overhaul which will also boost pension savings for workers.
The government will also cut the company tax rate from 30 percent to 29 percent from mid 2013 and to 28 percent by mid 2014, and will refund state-based royalties currently imposed on mining projects.
The new 40 percent Resource Super Profits Tax will hit big miners such as BHP Billiton, , Rio Tinto and Xstrata and is set to raise about A$12 billion ($11 billion) in its first two years.
If implemented, these proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians, BHP Billiton chief executive Marius Kloppers said in a statement.
Kloppers said the changes would increase the groups effective tax rate on Australian earnings to 57 percent from the current rate of around 43 percent.
Investment bank UBS said predicted a sell-of of Australian mining stocks on Monday as investors digested changes, which could also send a chill through mining mergers and acquisitions.
I think it's clearly negative for the big miners. I expect them to be down fairly materially, UBS chief strategist David Cassidy said.
Treasurer Wayne Swan said the government expected strong opposition to its plan, from both the resources industry and conservative opposition parties, and would now consult miners on details of the new tax.
We are under no illusions about how difficult it will be to win support for this package, he said, adding support would never be unanimous.
Swan said the new tax would help all Australians share the benefits of a prolonged mining boom, fueled by demand from China and India, which helped Australia avoid recession during the global financial crisis.
Australia faces elections in the second half of 2010, most likely in October, with Prime Minister Kevin Rudd ahead in opinion polls and seeking to win a second term in office.
The government says the changes will lay the base for a 10-year reform program and won't seek to legislate for them until after the next election, when it could still face stiff opposition from a hostile upper house.
Conservative opposition leader Tony Abbott said he was strongly opposed to the new mining tax, which he likened to the government's shelved emissions trading scheme (ETS).
I am deeply, profoundly hostile to the idea of a great big new tax, like the ETS, on the most important and productive part of the economy, Abbott told reporters, without confirming whether he would try to vote down any changes.
With an election due within six months, the government also announced an increase in employer-paid pension fund contributions for workers, to 12 percent from the current 9 percent by 2019-20, boosting Australia's A$1.2 trillion retirement savings pool, the world's fourth-largest.
The contributions will rise by 0.25 points in 2013-14 and in 2014-15, then by 0.5 percent a year until reaching 12 percent, Swan said, sending an extra A$85 billion surging into retirement savings over 10 years.
The government will also contribute A$500 a year to pension-fund savings for low-paid workers. Older workers would receive a low tax rate on contributions up to A$50,000 a year, up from a A$25,000 cap now.
Swan said the pension fund industry would swell by A$500 billion by 2035, fueled by the changes.
The reforms will be welcomed by the funds industry, including big firms such as AMP and Axa Asia Pacific , as well as major banks that run large funds businesses, such as Commonwealth Bank of Australia .
Swan denied the new mining tax would discourage investment, and said governments had only received about A$9 billion extra from resource charges over the past 10 years, while resource profits were A$80 billion higher.
To further allay mining concerns, Swan said Australia would now also give mining companies a tax rebate to offset the cost of resource exploration from July 2011, in a move it said would benefit 4,300 companies.
The government will also set up an infrastructure fund, with an initial payment of A$700 million from 2012-13, to help pay for roads, ports, railways and utilities for resource industries.
Rudd told reporters the tax changes would help stimulate and expand the mining industry, quoting independent modeling as finding that the mining activity would grow 5.5 percent over 5-10 years.
(Editing by Mark Bendeich and Rob Taylor)