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BHP's billions -

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HEATHER EWART, PRESENTER: BHP Billiton's announcement today of corporate Australia's biggest-ever
half-year profit of more than $10 billion has reignited debate over the need to bolster the mining
taxes on so-called super-profits. The profit announcement coincides with the release of Treasury
documents showing the Federal Government sacrificed $60 billion in forecast revenue when it
reworked its proposed mining tax. This put the Government on the defensive today, as did
suggestions that another backdown on the mining tax may jeopardise election promises. Greg Hoy
reports.

GREG HOY, REPORTER: Records just keep tumbling in the profitability of major mining companies. Last
week, Rio Tinto tripled its annual profit to $14.3 billion and Xstrata announced a $6.6 billion
profit. Today it was the world's biggest miner's turn and BHP Billiton's half-year figures were
mind-boggling and summarised to analysts as earnings before interest, tax and appreciation or
EBITA.

MARIUS KLOPPERS, CEO, BHP BILLITON: Today we announced record results for the half year. Our
underlying EBITA was up 60 per cent to US$17.3 billion. Attributable profit was US$10.7 billion
before exceptional items, and that is up 88 per cent.

GREG HOY: It's great news for shareholders, with a massive $10 billion share buyback in total now
planned for BHP Billiton, and as analysts predict full-year profits may reach $25 to $30 billion
this year and even more next year, it was enough to reignite debate over the need for a greater
super-profits tax.

BOB BROWN, GREENS LEADER: It's the Australian people's resources. These huge companies are going to
export, in the case of BHP, some 40 per cent of their profits. Rio, 70 per cent.

MARIUS KLOPPERS: The strong cash flow and healthy balance sheet meant that we were able to increase
our interim dividend by 10 per cent over the corresponding period.

MITCH HOOKE, CEO, MINERALS COUNCIL: The bottom line is that the super-profits tax has been rejected
by the Prime Minister. The Prime Minister and the Treasurer have rejected the Greens' position.
What would have happened had the super-profits tax come in is it would have delivered us an
effective tax rate of 58 cents in the dollar. Now that is way over the top of Mount Everest of
international tax rates.

GREG HOY: It's not just the Greens, however, who've called for a return to consideration of a
so-called super-profits tax. Many others have criticised the handling of the mining tax
negotiations by both the Opposition Leader, who opposed any new mining tax, and the Prime Minister,
who agreed to revise and reduce the tax rate.

BERNIE FRASER, FMR RESERVE BANK GOVERNOR (14th July, 2010): When you allow for the 25 per cent
extraction allowance, which reduces that 30 per cent down to 22.5 per cent, that's a sellout to me.

JOHN FREEBAIRN, ECONOMICS, MELBOURNE UNI: If you're in oil and gas, there's a 40 per cent resource
rent tax. If you're in iron ore and coal, it's a 22.5 per cent resource rent tax, but with credits
for royalties. And if you're in copper, gold, uranium and other minerals, it's back to the old
royalty system. Now logic would say you should have the same system across all mines and energy
stuff. This is just a hodgepodge chaotic mess.

GREG HOY: Such sensitivities were aggravated by projections released by the Treasurer's office
under Freedom of Information laws, which suggest the revised Minerals Resource Rent Tax, or MRRT,
could collect $60.5 billion less over 10 years than the original super-profits tax proposal.

BOB BROWN: The decent and reasonable thing is for the Government to negotiate on this matter in
these circumstances. There needs to be some clawback of a fundamental mistake in giving these huge
mining corporations this $60 billion that should be going to the well-being of the Australian
people now and in the future.

WAYNE SWAN, TREASURER: A 10-year projection is not one that you can necessarily say is holy writ.
It's highly variable, highly subject to change. It's affected by a range of factors. ... Nothing
new whatsoever in the figures that are floating around today. Last July, after we published the
details of the MRRT, we said it would raise significantly less revenue.

GREG HOY: But perhaps more sensitive for the Treasurer is whether revenues might be even lower for
the mining tax since a policy transition group, co-chaired by Resources Minister Martin Ferguson
and former BHP Billiton chairman Don Argus recommended to the Treasurer at Christmas that the
Government give into the miners on another bitter dispute.

SAM WALSH, RIO TINTO IRON ORE CEO (20 Oct., 2010): If you can't trust government, who can you
trust?

GREG HOY: It's an argument over whether there was any agreement that all future rises in state
mining royalties would be deductible from the new federal mining tax. The Government originally
categorically denied any such agreement was made.

MITCH HOOKE: Basically we're back to yet another debate and consideration of what is good tax
policy.

IAN MACFARLANE, OPPOSITION RESOURCES SPOKESMAN: It now comes down to whether or not Julia Gillard
wants to keep her word with the people she signed the deal with in such haste last July-August. The
reality is, though, that this scheme is disintegrating underneath the Government.

WAYNE SWAN: When we put the proposals together we looked at the medium term and we allocated
revenue to the tasks that are very important for our country's future prosperity. Investing in the
superannuation of low income Australian wage earners, putting money into infrastructure,
particularly in resource rich states like Queensland and WA, and gradually bringing down the
corporate rate. And that's what we're doing and all of that's achievable.

GREG HOY: But it's another battle brewing. The Treasurer has suggested if Cabinet agrees to roll
over, allowing deductions of state royalties, as must be likely, states that do raise their
royalties could be penalised in the allocation of GST revenues by the Commonwealth Grants
Commission. Western Australia has said it would fight any such move, but tax analyst and economics
professor at Melbourne University John Freebairn thinks the Grants Commission would favour the
Government.

JOHN FREEBAIRN: They divvy it up so that each state has roughly the same opportunity to provide
health and education. And so as the royalty revenue goes up in Western Australia, their share of
the GST goes down. And in fact some people estimate if their royalty revenue went up $100, $80 of
that $100 would be redistributed to the other states. That doesn't leave much of an incentive for
the Queenslands and Western Australias to push up their royalty rate.

GREG HOY: There's a lot more friction to come it seems on the mining front. Australian Workers'
Union head Paul Howes is threatening vigorous industrial action against Rio Tinto over the pay
rates of its workers in the wake of Rio's bumper profit announced last week, with each profit
announcement for major miners in the foreseeable future likely to further enflame the mining tax
debate.

HEATHER EWART: That report from Greg Hoy.