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Report On Australian Mining Calls For Tax Reform

by Mary Swire,, Hong Kong

31 March 2017

A new report commissioned by the Minerals Council of Australia says a competitive and fair taxation system is critical to sustain the mining sector's AUD236.8bn (USD181.2bn) economic contribution.

The report, "Mining and METS: engines of economic growth and prosperity for Australians," was compiled by Deloitte Access Economics. It concluded that the total economic contribution of Australia's mining and mining equipment, technology, and services (METS) sector was AUD236.8bn in 2015-2016.

The report also found that the mining and METS sector accounts for around 15 percent of Australia's GDP and supports 1.1m jobs across the country.

The report noted that at 30 percent, Australia's company tax rate is higher than the OECD average of 22.6 percent. It is also higher than other OECD countries with significant mining activity, such as Canada (26.7 percent) and Chile (24 percent).

"This higher taxation rate in turn lowers returns on foreign investment in mining, which can influence the decision making of foreign investors determining where to invest capital," the report stated.

The report also pointed out that "the interaction of state and territory royalties with federal company tax means Australia is a relatively high-tax jurisdiction for mining." It referred to a 2016 study carried out by Deloitte Access Economics, which found that the industry faced an effective tax rate (company tax plus royalties) of 54.3 percent in 2014-15.

According to the report, if the Government is able to pass its ten-year plan for company tax cuts, the package could improve the nation's international competitiveness and the attractiveness of Australian mining projects.

The report said: "A competitive and fair taxation system is critical to support investment in globally competitive industries such as mining. Mining projects involve high-risk exploration outlays, large upfront capital commitments, long-life assets, sophisticated technologies, and long lead times to profitability. Competition from other resource-rich economies to capture future opportunities in resource development is intense."

"In this environment, it is important the taxation system be not only competitive but also predictable, as stability supports long-term capital investments by minimizing Australia's sovereign risk profile."

TAGS: tax | investment | Chile | mining | royalties | corporation tax | Australia | tax rates | Canada | tax reform | trade association | trade

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