Friday, January 22, 2010

We own the minerals, lets get a share of the profits from selling them

The Henry Tax Review has recommended scrapping the state-based royalty taxes applying to mining projects and replacing them with a uniform national resource rent tax set to raise billions more.

The tax, most likely to be set at 40 per cent, would be modeled on the existing Petroleum Resource Rent Tax that is levied on petroleum products including crude oil and natural gas mined in Commonwealth waters other than the North West Shelf and the jointly-developed area between Australia and East Timor.

Treasury calculations suggest that if the PRRT formula had been applied to resources such as iron ore and coal and to companies including BHP Billiton and Woodside Petroleum over the past three years it would raised an extra $14 billion...

In contrast to some of the state-based royalties the resource rent tax would not be levied until all of the exploration and development costs associated with a project had been paid for and would only be levied in those years when the project actually made a profit.

Treasury calculations show that had the system been in place in earlier in the early years of the last decade it would have actually raised less money than royalties because many mining projects were not making profits.

Treasury head Ken Henry yesterday defended special taxes on mining projects telling the Australasian Tax Teachers Association that while company tax partly taxed "profits extracted by foreigners from Australia’s natural and immobile resource endowments" Australia's special circumstances suggested the need for an additional tax.

"Many developed countries are either large economies, for which capital might not be so elastic in supply, or have few exploitable natural resources remaining," he told the conference.

The proposed resource rent tax would itself be tax deductible for purpose of calculating company tax.

Although it would be levied on a project by project basis, if it was like the the present petroleum tax it would allow companies to write off spending on new projects against profits from existing ones.

Making the case in an address to the Australian Minerals Council in September Treasury official David Parker said the Australian community "expects and should expect to receive a fair return from its natural resources."

The final report of the Henry Tax Review was delivered to the government in December.

Published in today's SMH and Age

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