Australia’s mining industry scored a victory in its clash with the government over a controversial new mining tax yesterday, when an official study backed its stance on the levy.
The tax triggered an angry backlash from the nation’s most valuable export industry when it was first suggested in May, and was a key factor in toppling then-Australian prime minister Kevin Rudd in a Labor Party coup the following month.
A compromise agreed between Rudd’s successor Australian Prime Minister Julia Gillard and BHP Billiton, Rio Tinto and Xstrata has since appeared shaky after the miners accused the government of reneging on a deal to refund all state royalty payments.
However, the government-commissioned report into the Mineral Rent Resources Tax (MRRT) supported the miners’ view, saying they should receive tax credits for all state mineral and gas royalties paid.
“The MRRT should not be used as a mechanism to enable States and Territories to increase inefficient royalties on MRRT taxable commodities,” it said. “All current and future State and Territory royalties on coal and iron ore should, therefore, be credited.”
The report is at odds with the government’s stance, which sets royalty rebates at their May level and does not factor in any future increases.
Australian Treasurer Wayne Swan said he would not endorse or reject any of the recommendations in the report immediately and would respond early next year.
“But I can say this: There is a lot of common sense in this report, a lot of common sense in these recommendations,” he told reporters in Canberra.
He said he would work through all 94 recommendations in the report, which said that Australia’s coal and iron ore industries needed certainty.
The mining tax, set to apply to iron ore and coal from mid-2012, will fund infrastructure, pensions and tax cuts for small businesses, Swan said.
“This type of reform is absolutely critical to the future strength and prosperity of our country,” he said.
Swan said the report from the MRRT policy transition group would be discussed by the Cabinet as well as by state governments and the resources industry, which is forecast to contribute some A$177.4 billion (US$176.8 billion) in exports this year and next year.
The resource-rich eastern state of Queensland has already indicated it will never surrender its right to set royalties for its minerals.
“We will certainly be maintaining our right, completely, to set royalties not only now, but, I would expect any Queensland government of any political persuasion, forever,” state Premier Anna Bligh said.
“If that has consequences for federal arrangements that would be something that needs to be negotiated frankly between the mining companies and the federal government,” Bligh said.
Colin Barnett, leader of Western Australia state, which has massive iron ore and other mineral deposits that are critical for the national economy, opposes the MRRT and has flagged a royalties hike from next July.
Industry has commended the report, with Minerals Council of Australia chief executive Mitch Hooke saying it provided a clear pathway for the new tax.
“It is now crystal clear that all current and future royalties must be credited against MRRT liabilities, as the industry has maintained throughout the debate,” Hooke said.
Rio Tinto welcomed the report, saying while it would take some time to fully consider its recommendations, it constituted an important step towards honoring the agreement made with the government.