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Australia offers 'watershed' mining tax compromise: report

Australia has offered mining companies a "watershed" compromise on a controversial new tax which helped trigger last week's dramatic change of prime minister, a report said today.

world Updated: Jun 30, 2010 14:55 IST

Australia has offered mining companies a "watershed" compromise on a controversial new tax which helped trigger last week's dramatic change of prime minister, a report said on Wednesday.

The watered-down proposal makes key concessions to the powerful mining companies, including reducing the profit tax's impact on existing projects, the Australian Financial Review said without citing sources.

Treasurer Wayne Swan refused to divulge details of the talks with the mining industry, except to say they were proceeding "in good faith".

"I'm not going into the ins and outs of these discussions and nor am I going to put any conditions around those discussions," he told reporters in Canberra.

"We are not into megaphone diplomacy here, we are sitting down in good faith discussing matters with a wide range of people."

Swan said the government, which is expected to call an election soon, wanted to resolve the row "as soon as we can." "And that's what we'll do," he said.

New Prime Minister Julia Gillard has made the tax row her top priority after last week ousting Kevin Rudd, whose once record popularity was fatally sapped in the public dust-up with the mining companies.

Fortescue Metals' billionaire chief Andrew Forrest earlier raised pressure on Gillard by saying Rudd was just 24 hours from announcing a deal before he was sensationally unseated in last Thursday's quickfire leadership challenge.

"The previous prime minister was cut off bringing a solution onto the table," he told a conference in Perth on Tuesday, according to public broadcaster ABC.

"I would suggest that the new prime minister brings that solution to the table for a discussion with the whole mining industry as soon as possible."

Gillard meanwhile called for "a bit more light and bit less heat" in the debate over the tax, which envisaged a 40 percent levy on mining profits over six percent.

"Actually, there's a bit of agreement here: a bit of agreement that Australians are entitled to a fairer share, a bit of agreement that the mining industry can pay more tax, so let's build on that," she told commercial radio.

The tax has threatened to cost the ruling Labor Party at upcoming polls, expected within months or weeks, and make it the only single-term government in the post-war period.

Gillard's first act in office was to broker a truce between the government and the mining industry which saw both cancel TV advertising campaigns on the issue.

Mining provides Australia's two biggest exports, iron ore and coal, and helped the country skirt the worst of the financial crisis thanks to massive demand from Asian countries such as China.