Home > Market change > Fresh victory for miners on Australian tax

Fresh victory for miners on Australian tax

March 25, 2011

“Canberra will refund any increase in royalties that cash-rich mining companies are forced to pay Australian states, amid concerns that governments around the world may not be receiving a fair share of their mineral wealth.

Julia Gillard, Australia’s prime minister, last year tried to end a dispute with mining multinationals, including Rio Tinto and BHP Billiton by watering down a proposed “super profits tax”. But the issue of who would pay higher royalties in states such as Western Australia, where much of the world’s iron ore is mined, remained a bone of contention. The minority Labor government said on Thursday that it had agreed to all 98 recommendations from a policy review group led by Don Argus, the former chairman of BHP . These included a provision that miners should receive credits for “current and future royalties” charged by state governments.”

Source: Financial Times, March 24 2011

Observations:

  • The minority government needs to secure enough votes for a tax to get it approved. The (Green) Liberal-National coalition has announced it might vote against the proposal, as it is favoring a higher tax rate.
  • The new tax is a watered down version of the super profits tax proposed by former prime minister Kevin Rudd. The new tax, which could increase tax revenues for Australia by several billion dollars, should become effective next year.

Implications:

  • By ensuring that miners are not hurt by royalty increases from local and regional governments the policy review group tries to reduce uncertainty for Australia’s miners. Being able to accurately predict royalty and tax cash flows is of great importance to investment planning.
  • Colin Barnett, the premier of Western Australia could play an important role in securing support for the MRRT. Barnett does not agree with federal influence on state royalty systems, arguing that the resources are owned by the state (of Western Australia) and that too much money is going from his state to other parts of Australia. He is campaigning to stop the reform.

©2011 | Wilfred Visser | thebusinessofmining.com

Advertisements
  1. micron@iinet.net.au
    March 26, 2011 at 1:41 am

    The Federal Government should seek input from smaller miners such as Fortesque, Hancock and Junior Explorers, before imposing a MRRT- not just reccommendation by personnel from the largest 3 miners.
    I agree with Colin Barnett-too much Tax money is being sent to other States to subsidise them. The money is Better spent developing Western Australian infrastructure not subsidising inneffienct Manufacturing States.
    JK

  1. No trackbacks yet.
Comments are closed.