Australia calls off mine tax idea

Australia's government on Friday dropped plans for 40 percent tax on booming mining company profits, defusing a damaging row with big business and clearing the way for national elections to be called at any time.

Mining companies had campaigned mightily against the proposed tax, and it was a key factor in the sudden ouster of Kevin Rudd as prime minister after he refused to negotiate. Friday's announcement from new Prime Minister Julia Gillard effectively removes the issue from the political agenda.

Opinion polls showed an immediate boost for the ruling Labor Party when Gillard took office, and she may choose to capitalize on that popularity by calling elections as soon as this weekend. Elections must be called by year's end.

"The breakthrough agreement keeps faith with our central goal from day one: to deliver a better return for the Australian people  for the resources they own and which can only be dug up once," Gillard said.

The new deal replaces a so-called "super profits tax" of 40 percent with a profits-based minerals resource rent tax of 30 percent that will affect about 320 companies, down from the 2 500 that fell under the original tax proposal.

It will apply only to the iron ore and coal industries - Australia's biggest exports - and would begin in 2012. The new resources tax will reduce revenues by an estimated Australian dollars 1.5 billion ($1.27 billion) over four years compared to the previous proposal of AU$9 billion.

In a joint statement, top miners BHP Billiton, Rio Tinto and Xstrata welcomed the new scheme.