The author of the controversial proposed 40 percent tax on resources particularly in the mining sector, has warned on Wednesday against tinkering with the new tax measure. Treasurer Ken Henry said the mining tax is facing the risk of becoming into a net tax subsidy for resource companies if the government gives in to the demands of the mining industry.

Henry warned that the mining sector is pressuring the government particularly in the computation of the mining tax. But he said doing so would make the new measure to offset tax breaks which is tantamount to subsidy.

The mining sector, led by mining giants BHP Billiton, Rio Tinto and others, have threatened to rethink their investment plans should the government pushes through with its planned "super profits" tax in 2012.

Henry's proposal suggests to provide major tax breaks and credits which can accumulate in the development phase of a project, before it becomes profitable and will be slapped with a 40 percent tax.

"This would generate a significant subsidy for investment in the mining sector and, ironically, create incentives to delay resource production," Henry said.

Currently, Australia's mining tax grants a lifetime of tax breaks that can be cashed out should the project is shut down. The offshore oil-and-gas industry do not enjoy such tax breaks.

However, Australia's mining sector are against Henry's proposal and is encouraging the Parliament to overturn the plan. The industry is also lobbying the government for a compromise agreement, including altering the calculation of the tax.

The Rudd administration is in talks with the mining sector hoping to find a middle ground, but Henry is opposing tinkering with the proposed tax measure.