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Mining Tax Challenge Goes To Australian High Court

by Mary Swire,, Hong Kong

08 November 2012

The Australian High Court will hear a challenge led by Fortescue Metals Group to the controversial mining tax as early as next year, following a decision taken earlier this week.

The Minerals Resource Rent Tax (MRRT) entered into force on July 1. The tax applies to the mining of iron ore and coal in Australia at an effective rate of 22.5%, after taking into account the extraction allowance. Miners with MRRT assessable profits of less than AUD75m (USD78.1m) per annum are not liable.

The government has constantly stressed that the MRRT will spread the benefits of the mining boom and tackle economic pressures felt by businesses and households. It will be used to fund the AUD3.6bn tax reform package announced in the 2012-13 Budget.

Original government estimates anticipated additional revenue of AUD13.4bn by 2015-16. Of this, AUD2bn was expected to be generated in the 2012-13 financial year alone. However, it has been alleged that the tax generated no income in the September quarter, and it is now anticipated to bring in just AUD500m by the end of the financial year.

Fortescue is Australia's third-largest iron ore miner and launched its challenge on the premise that the levy is unconstitutional because only state governments are permitted to impose royalties. In July, the Queensland government announced that it would take part in Fortescue's legal attack, a move described by federal Treasurer Wayne Swan as "futile".

The case was heard on November 5 by High Court Chief Justice Robert French. He referred the case to the court's full bench, and it is believed that it could be heard as early as March next year.

TAGS: court | tax | business | mining | royalties | law | Australia | tax reform

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