Mining associations were united in their description of the new tax as a “revenue grab” that will savage the industry, and all were quick to point out that the resource sector already pays its share of tax through company taxes and state royalty schemes.
The Association of Mining & Exploration Companies says the new tax will bury the mining industry, with chief executive Simon Bennison accusing the Henry review of having “lost its way in understanding business fundamentals and the decision-making processes”.
“The mining sector already pays significant amounts of company tax and GST to the federal government; and large amounts of royalties, payroll tax, stamp duty and other state/territory-based taxes,” he said.
“The introduction of a mining tax will have disastrous consequences on the operations and viability of many mining companies that are still reeling, and gradually recovering from the impacts of the global financial crisis. There is no doubt that the smaller and more fragile mining companies will be placed in a very difficult position on how they deal with the introduction of an unexpected and unbudgeted expense – the mining tax.”
Bennison told MiningNews.net that AMEC is “very unimpressed” with the proposals on first glance and he saw no justification for an additional tax on the resources sector. He said the complexity of the system also has the potential to disrupt the sector.
Minerals Council of Australia chief executive Mitch Hooke described the plans for a Resource Super Profits Tax (RSPT) as an “unprecedented double-tax” that will hit the industry’s workforce, the millions of Australians with shares in superannuation or minerals companies, and the thousands of small businesses that service the industry.
“In the rush to extract more than the $25 billion already paid to governments in taxes and royalties, the Commonwealth appears to have inadequately accounted for the stifling effects of this new tax on the minerals industry,” he said.
And tax specialists agree, with BDO corporate tax director Russell Garvey saying this afternoon the imposition of the resources rent tax risks undermining the competitiveness of Australia’s mining sector in the global marketplace.
Garvey, who specialises in mining taxation, said the tax increase would make Australian mining projects among the most highly taxed in the world.
“The onshore minerals sector feared the federal government would ignore the different operating and capital requirements between the mining and offshore oil and gas sectors and impose a model and rate similar to the Petroleum Resources Rent Tax. Their worst fears have been realised,” he said.
The Government had attempted to create a soft landing for existing projects in the mining sector, but Garvey said there needed to be a reassessment on the best way to manage development projects in the pre-feasibility stage.
Garvey said industry would be looking for features contained within the Petroleum Resources Rent Tax, such as transferability rules, the immediate deductibility of eligible costs, carry forward provisions and the taxing unit being assessed on a project basis, to offset at least some of the 40% tax grab.
Consultation
With the government set to begin formal consultation with companies and industry bodies shortly, in an effort to have draft legislation ready by the middle of next year, industry groups have also called on the government to do a better job of consultation than they did with the former emission tax proposals.
“The real work on the proposed reforms will start tomorrow when the government sits down with industry and gets a real-world understanding of the high-risk cyclical nature of the mining industry and the full impact of what they have announced,” Hooke said.
Bennison told MiningNews.net today’s announcement had caused massive confusion amongst his organisation’s membership, and any scheme would need to be carefully discussed with the mining industry before it was implemented.
Queensland Resources Council chief executive Michael Roche also called on the federal government to consult carefully.
He said that, in the aftermath of the "lip-service" paid to industry consultation over the ill-fated Carbon Pollution Reduction Scheme, there would be deep scepticism over the federal government’s latest commitment to industry consultation.
“There’s a strong perception among QRC members that the federal government believes the resources sector has a limitless ability to pay more and more tax, particularly after it was targeted to cross-subsidise handouts under the failed CPRS,” he said.
“If the federal government is serious about consulting with industry in the long-term interests of the Queensland and Australian economies, it has to road test what is a complex set of new arrangements with resource sector people – not just through a computer model in the Treasury building in Canberra.”
Western Australian Chamber of Minerals and Energy chief executive Reg Howard-Smith said it was already clear the RSPT threatened economic growth, Australian jobs and the sector’s ability to compete in a global market.
“We had hoped the Henry Tax Review would streamline the Australian tax system and promote growth, rather it seems to have added complexity and will limit growth,” he said.
“It has singled out the resource sector for a 40 per cent super-tax – a tax on an efficient and globally competitive industry which carried the Australian economy through the financial crisis.
“While we are still trying to understand the complexity of the new reform it appears it will act as a disincentive for investors to develop new or expand existing projects.
“There is a real risk these investors and companies will shift their attention
overseas.”
Source: www.miningnews.net