Australian billionaires take to the streets for tax protest

It was, by any measure, a most unusual rally. Many of the placard-waving protesters gathered in a Perth park wore suits and ties, and impassioned speeches were delivered from the back of a flat-bed truck by two billionaires, including Australia's richest woman.

Gina Rinehart's pearls glistened in the sunlight as she bellowed through a megaphone: "Axe the tax!" Ms Rinehart has a personal fortune of $4.8bn (£2.7bn). Andrew Forrest, in monogrammed worker's overalls, told the well-mannered crowd that Australia was "turning Communist". Mr Forrest is the country's fourth richest person, worth an estimated $4.2bn.

Both Mr Forrest and Ms Rinehart have amassed their wealth from digging up iron ore in the remote Pilbara region. Like other mining magnates, they have grown fabulously rich during a resources boom based largely on China's insatiable demand for the coal, iron, nickel and other minerals that lie in abundance beneath Australia's rust-red soil.

Now Kevin Rudd's Labour government is planning to levy an extra tax on the mining industry, and the industry is furious. The issue has dominated the political agenda for weeks, and is even threatening to torpedo Mr Rudd's chance of being returned to power at an election due to be held before the end of this year.

Labour, which had an unassailable lead over the conservative Liberal-National Party coalition six months ago, is now trailing by six percentage points, according to a poll this week. If that were translated into votes on election day, Mr Rudd would become the first prime minister for nearly 80 years to lose office after just one term.

The so-called "super tax" – which will claim 40 per cent of profits above the long-term government bond rate – is not the only reason why Labor was so unpopular. There is a bungled home insulation scheme, blamed for four deaths. There is Mr Rudd's decision to freeze the processing of claims by Afghan and Sri Lankan asylum-seekers. And there is his postponement of a carbon emissions trading regime – this from a man who once called climate change "the greatest moral and economic challenge of our age".

But there is no doubt that the tax has compounded the government's problems. Resources, which account for more than 40 per cent of exports, have been the bedrock of the economy for years. It was largely thanks to mining that Australia – alone among developed nations – barely noticed the global financial crisis. Some see the imposition of an extra financial burden on the industry as positively unpatriotic.

Mr Rudd argues that the new tax, which will be used to boost pensions and fund infrastructure programmes, will spread the fruits of the mining boom more fairly. At present, the mineral-rich states of Western Australia and Queensland profit disproportionately. And while those who work in the industry are handsomely paid – train drivers in the Pilbara earn up to $210,000 – many Australians derive little benefit.

For their part, the mining companies, led by the multi-nationals BHP Billiton and Rio Tinto, claim the tax will reduce their competitiveness and threaten thousands of jobs. Amid much fanfare, they have already shelved a number of projects. They have also launched a major advertising campaign. The government has responded with its own advertisements, using $38m of public money. Before coming to power, Mr Rudd promised to curb taxpayer-funded advertising on political issues.

So far, the miners appear to be winning the argument. A poll commissioned by the industry, and conducted in nine marginal seats, found 48 per cent of people opposed to the super tax, with 28 per cent in favour. Nearly one in three said they were less likely to vote for Labour because of it.

This week's rally – organised by the Association of Mining and Exploration Companies (AMEC), which represents the smaller operators – was timed to coincide with a visit by Mr Rudd to Perth, the city that is Australia's resources powerhouse.

As the Prime Minister addressed a lunch hosted by the Perth Press Club in the Hyatt Regency Hotel, Ms Rinehart was filling her lungs with air in a nearby park. "And what are we gonna tell those jittery Labor MPs in marginal seats?" demanded the normally reclusive billionaire through her loudspeaker. "Axe the tax! Axe the tax!" chanted the crowd.

"And what does our Premier [the Liberal Premier of Western Australia, Colin Barnett] say?" asked Ms Rinehart, almost hoarse. "Axe the tax! Axe the tax!" replied the protesters. She went on: "And Kerry [Stokes, proprietor of the state's newspaper], please listen: what should our West Australian newspaper be saying? Axe the tax!" More cheers from the crowd.

Mr Forrest once called Mr Rudd a close friend. Now he is the prime minister's most outspoken critic. At the rally, he declared: "We represent so much more than mining; we represent the hopes and dreams of millions of people who depend on the mining industry, who depend on the resource sector for a strong Australian economy." (His hyperbole did not go unnoticed by sober commentators; the industry employs about 130,000 people.)

As the crowd waved their neatly written placards – handed out by AMEC, and bearing slogans such as "Super tax, super stupid" and "Super tax kills jobs" – Mr Forrest noted that China had been debating a lower resources tax to assist its industry. "I ask you: which communist [country] is turning capitalist, and which capitalist is turning communist," he proclaimed.

Mr Forrest has built his company, Fortescue Metals, up from nothing within the space of a few years. Ms Rinehart inherited her company, Hancock Prospecting, from her father, Lang Hancock, who spied the Pilbara's potential in the 1950s when stormy weather forced his light plane to fly low over its rust-red gorges. He realised the walls were made of solid iron ore.

Now Rio Tinto, BHP and Fortescue produce 350 million tons of iron ore a year in the Pilbara. Much of it is shipped to China, as raw material to fuel that country's industrial revolution. South Korea, India and Japan are also major customers.

Mr Rudd is locked in negotiations with the mining industry, and has offered several sweeteners, including a guarantee of extra infrastructure funds for Western Australia. Whether he can persuade this most powerful of lobbies of the wisdom of his new tax, and resurrect his political fortunes in time for the election, remains to be seen.

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