Mining industry tax take up to highest level in six years

Concerns are growing that Australia could become a less attractive place to invest as the tax take from profits in the minerals industry grows to its highest level in six years.

 

A survey from the Minerals Council of Australia and Deloitte Access Economics has found that the minerals industry paid nearly half of every dollar of profit as royalties and company tax in 2012-13. 

 

The MCA says tax take for the 12-month period was 47.1 per cent. This is the highest recorded level since the first tax survey in 2007-08.

 

The average tax take since the survey began 42.5 per cent, which puts this latest year of data on top of the pile and heading in the wrong direction according to mining executives that are able to choose from a range of locations to invest around the world.

 

Phil Edmands, managing director of Rio Tinto Australia, has told the Australian Financial Review that corporations and miners especially were “usual ­suspects” in the quest by governments for more revenues to plug stubborn budget deficits.

 

“But really, you do need to ask the question, ‘what is a reasonable amount of tax to pay and what is competitive’?” he said. “You can’t ultimately degrade the competitiveness of the country simply by taxing more and more because there is some profit left.”

 

He said the amount of tax paid was fair but it was high relative to competitors, and any further increases would handicap Australian miners in the global battle for investment capital.

 

“That is fair and that is reasonable, and given that it is actually high ­compared to competitors, there’s not really scope for increased taxation.”

 

This is the third consecutive year in which the tax burden on the industry has increased, reflecting large falls in commodity prices and mining industry profitability, as well as increases in royalty rates levied in Queensland and Western Australia. Further falls in commodity prices since mid-2013 mean the tax ratio is expected to have risen again in 2013-14 (which will be assessed in next year’s survey).

 

Minerals Council of Australia CEO Brendan Pearson said this year’s results show the acute tax competitiveness challenge that confronts Australia’s minerals industry as we grapple with weaker business conditions. 

 

“Governments at all levels – State and Federal – need to take a long-term view that prioritises industry growth as the vehicle for delivering higher revenues over time. No longer can this industry be seen as a honey-pot for short-term revenue raids,” he said.

 

“Compared with a decade ago, total mineral royalties and company tax payments from the industry have almost trebled as a share of GDP. Recent estimates from Deloitte Access Economics are that revenues from royalties and company tax combined totalled $156 billion over the decade to 2013-14.” 

 

The total tax ratio refers only to royalties and company tax. It does not include a range of other taxes, charges and levies paid by the minerals industry, including the Minerals Resource Rent Tax and the carbon tax which were also levied in 2012-13. 

 

The report is available at www.minerals.org.au