Australian opposition parties call for mining tax reform

By Nilima Choudhury
Published: Wednesday, 26 March 2014

Significance: With the repeal of the Mineral Resources Rent Tax (MRRT), the government is looking to replace it with one that offers breaks to junior exploration companies, which it believes will encourage foreign investment in the country. However, opposition leaders fear the tax will take jobs and profits out of Australia.

Graphite deposit in South Australia. Image: Lincoln Minerals Ltd.
Australia’s ruling government, the Liberal party, has lost its battle to repeal the country’s mining tax, installed by the previous administration.

Given that the law now looks set to remain in force, opposition figures have called for the bill to be amended.
Senator Mark Furner from the opposing Labor party suggested the Mineral Resources Rent Tax (MRRT) needs to include a 40% rate, as applied under the petroleum resource rent tax and should be extended to all minerals.

“The Senate calls on the government to withdraw the bill and redraft it to ensure that the benefits of the mining boom can be spread throughout Australian society,” he said.

“We [the Labor party] believe that the profits of our country's resources, which can only be dug up once, should be shared amongst all Australians, not just enjoyed by a handful of mining magnates,” said the Senator.

He added that the advantages of the MRRT was that it offered tax breaks to small businesses through the instant asset write-off and the tax loss carry-back pensions, helped young families through the ‘school kids bonus’ and assisted low earners with the low-income superannuation contribution.

Christine Anne Milne, leader of the Green party, was in agreement with Furner and said that the mining industry was “capital-intensive” and only contributed 10% towards GDP, employed 2.4% of Australians and therefore did not need any tax breaks in order to prosper.

“The profits have been taken by the companies concerned and have been funnelled overwhelmingly to overseas shareholders. The money has not circulated in the Australian economy to create jobs,” said Milne.

New tax breaks

Had the MRRT been repealed, Prime Minister Tony Abbot’s government intended to introduce the Exploration Development Incentive (EDI) to give tax breaks to junior exploration companies.

Minister for Industry Ian Macfarlane said the opposing Labor party’s refusal to eliminate the mining tax was a direct assault on the Australian economy, in particular the strong mining state of Western Australia.

The country is a major producer of industrial minerals like bentonite, chromite, kaolin, ilmentite and rutile.

“This is a tax that has hit mining companies with layers of red tape and tens of millions of dollars of compliance costs. But at the same time the mining tax is generating virtually no income,” said Macfarlane.

It was revealed in February that the MRRT had only raised Australian dollar (A)$126m ($116m*) in the first six months of operation, when the previous Labor government had promised A$2bn.

Macfarlane said: “The investment phase of our mining boom is coming to an end and now we see the benefits as we shift increasing volumes of product into hungry global resources markets.”

He quotes a report from the Australian Bureau of Resources and Energy Economics, which states that the country’s resources and energy commodity export earnings will increase by 8% per year from 2013-14 to total A$284bn in 2018-19.

Between 2012-13 and 2018-19, natural gas exports are projected to increase at an average annual rate of 22% to reach 79m tonnes, up from 24m tonnes in 2012-13.

“This government is firmly behind our miners and our mining industry. We will continue to work to deliver on our policies to get rid of the tax burden on the sector and to scrap excessive red tape,” said Macfarlane.

*Conversion made March 2014