Australian Mining Tax Under Attack From Many Sides

by Mary Swire, Tax-News.com, Hong Kong

03 August 2010

In the middle of the election campaign, the proposed Australian mineral resources rent tax (MRRT) has recently been under attack from both political and business sources.

Firstly, the Australian Senate Select Committee on Fuel and Energy has issued an interim report, entitled “The mining tax: still bad for the economy - still bad for jobs”, although the minority of government senators on the Committee expressed concern at the views in the report, and rejected both its title and recommendations.

In the report the Committee recommends that the proposal for an MRRT and an expanded petroleum resource rent tax (PRRT) should be scrapped immediately, and that the government should immediately task the Treasury to assess properly the impact of the new taxes on the smaller and mid-tier mining companies, jobs, investment in the mining industry and the state budgets and economies in Western Australia, Queensland and New South Wales.

The Committee also recommends that the Senate (which has, and is likely to remain with, a majority of members from the present opposition) should not deal with any legislation seeking to implement the new mining tax arrangements.

The Association of Mining & Exploration Companies (AMEC), whose membership mainly consists of Australia’s small and medium-sized mining and exploration companies that feel they have not been consulted in deciding the terms of the MRRT, has welcomed the Committee’s report as confirming that its opposition to the mining tax is completely justified

Simon Bennison, AMEC chief executive officer, said that “there are many observations and concerns contained in the report that reinforce the statements that AMEC and its members have been saying since May 2 that the tax will have significant implications for the economy, jobs and investment.”

“The report also highlights the inadequate consultation process that has occurred to the exclusion of 99% of the mining industry,” he added. “In the absence of any details of the calculations and assumptions made, the Committee has also raised serious concerns about the credibility or otherwise of the government`s revenue estimates.”

Bennison concluded that “the Prime Minister should take notice of this Committee report and immediately announce that the new mining tax will be withdrawn, so that open and transparent discussions can commence in developing a longer term genuine tax reform program that benefits the Australian economy, jobs, families and communities.”

On August 1, AMEC also launched the next stage of its advertising campaign against, what it calls, the government’s “proposed extra AUD10.5nn (USD9.6bn) tax on mining”. The latest national campaign, it says, “highlights how the extra tax will whack every Australian”.

“It doesn’t matter who you are or where you live, this tax will whack you,” Bennison insisted. “This extra tax on mining is going to cost the jobs of thousands of hard working Australians. It will potentially see the household cost of electricity rise, while the value of superannuation funds will fall. There is no avoiding the disastrous flow on effects this extra tax on mining will bring.”

The launch of the new advertising and community campaign coincided with the start of the Diggers and Dealers mining forum in Kalgoorlie, an annual conference for delegates from across Australia including miners, explorers, stockbrokers, investment bankers and those working in mining service industries.

Unsurprisingly, the mining forum showed widespread opposition to the MRRT. Drawing much applause, its chairman, Barry Eldridge, called the proposed tax “economic terrorism”. The forum’s keynote speaker, Niall Ferguson, reminded the government that the loading of taxes onto a sector when it is experiencing good times can go very wrong when the economic cycle turns.

However, Eldridge’s additional call for Australian’s to vote against the tax in the August 21 election, has enabled the government to label AMEC’s campaign as purely political, although that was immediately denied by AMEC.

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