Mining tax controversy far from over



Funny numbers; smaller miners still furious. And Even the Greens don't like it!

THE Gillard government surrendered at least $4.5 billion in potential tax revenue to clinch its "breakthrough" deal with the mining industry. This is three times more than the government claimed last week.

As Resources Minister Martin Ferguson told furious mining bosses in Perth he would consider further changes to the deal, Treasury secretary Ken Henry confirmed a significant rise in commodity prices had been built into the new tax forecasts compared with the original resource super-profits tax.


Dr Henry said the three big miners that negotiated the deal with the government - BHP Billiton, Rio Tinto and Xstrata - had substantial input into the design of the "very generous" new mineral resources rent tax, with Treasury largely sidelined.

Testifying before a Senate committee yesterday, Dr Henry said the government's forecast that the MRRT would still bring in revenue of $10.5bn in its first two years - down from the initial forecast of $12bn - incorporated the big iron ore and coal price rises miners had won since the May budget.

Mining tax consultants say these higher prices would have raised revenue from the $12bn forecast in the super-profits tax by at least 25 per cent, generating more than $15bn. This meant the government had given up about $4.5bn in potential revenue when it renegotiated the tax....

On Friday, Julia Gillard, Mr Swan and Mr Ferguson said the government had reached a deal with BHP, Rio and Xstrata on a new tax package, involving significant cuts to the super-profits tax rate, that it would take to the wider industry for consultation.

The MRRT and a new form of the petroleum resource rent tax cover only iron ore, coal, oil and gas projects, with all other minerals now exempt. Companies earning less than $50m a year in profits would also be exempt.

But smaller iron ore miners told Mr Ferguson at a fiery meeting in Perth yesterday further changes were needed for a package negotiated with only three players. Mr Ferguson said he would consider changes to the package, including restoring the exploration rebate and exempting the fledgling magnetite sector from the tax....

Coalition Treasury spokesman Joe Hockey attacked the revenue estimates for the new tax, describing them as a "conspiratorial deceit".

Mr Hockey noted that the Australian Bureau of Agriculture and Resource Economics updated its forecasts only once a year in March, and these provided the base for the May budget. "They don't have five-year forecasts of commodity prices other than from ABARE, but they've changed the formula to use spot prices," he said. "It goes to the heart of their credibility in claiming a $1bn surplus in three years."

SOURCE

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