The Australian government has reached a deal with mining companies over controversial tax plans.

Former Prime Minister Kevin Rudd had announced plans for a 40% tax on miners’ profits.

But a compromise agreement negotiated by his successor, Julia Gillard, has now reduced the rate to 30% for coal and iron ore miners.

But petroleum and gas operations will still pay a pre-existing 40% tax rate, the government said.

However that will now cover onshore oil and gas projects as well as the offshore operations previously subject to it.

Smaller iron ore and coal companies, with annual profits below A$50m (£28m; $42m), will not be required to pay the new tax.

The plans are still expected to raise billions of dollars for the government, however.

TV row

When Mr Rudd announced the tax plans earlier this year, he said he expected to raise A$9bn a year.

The revised plan would raise A$1.5bn less, the government said, but cuts to company tax rates that were to be paid for by the mining tax will still go ahead.

The BBC’s Nick Bryant in Sydney says the deal brings to an end one of the most angry battles between the government and corporate sector that Australia has seen.

The row played out on prime time television with confrontational advertisements from both sides, and played a key part in the demise of Mr Rudd, our correspondent says.

In a country often called the “quarry of the world”, many Australians believe their personal prosperity is inextricably linked with the fortunes of the mining giants, he adds.

Companies including BHP Billiton and Rio Tinto had launched an aggressive lobbying campaign against Mr Rudd’s tax plan, warning that it could harm economic growth.

But industry executives welcomed the fresh deal, calling it “a positive outcome”.

Ms Gillard said the “breakthrough agreement” would “deliver a better return for the Australian people for the resources they own and which can only be dug up once”.

Many political observers suggest that, having stuck a deal, Ms Gillard’s Labor Party – which has already seen a surge in the polls following her becoming leader last week – may call an election imminently to capitalise on its popularity.

Opposition parties have vowed to oppose the tax and scrap it if they win office.

From BBC News.