Kevin getting really greedy - but someone has to pay for the...

Kevin getting really greedy - but someone has to pay for the mess...

Miners face billions in new taxes
Dennis Shanahan, Political editor From: The Australian April 24, 2010 12:00AM


AUSTRALIAN mining companies face a massive new tax of at least $5 billion a year as the federal government plans to stack a resources rent tax on top of the $7bn miners pay in state royalties.
The plan to impose the new national resource rent tax, to be collected by the commonwealth, is expected to be disclosed next Sunday with the release of the Henry review into the tax system.

With the release of the long-awaited Henry report, the government will detail its plans to allow resources states such as Western Australia and Queensland to continue to collect mining royalties.

The proposal to have two separate mining taxes will affect the Rudd government's negotiations with Western Australia to hand over one-third of its GST revenues for the national health and hospital plan.

West Australian Premier Colin Barnett is the only state leader holding out against Kevin Rudd's national health plan, and is opposing any federal takeover of state taxes or new taxes on West Australian minerals.

Mining company executives, who have been expecting a new tax, told The Weekend Australian yesterday the federal resources rent tax on top of state royalties was the "worst-case scenario" and a "thermo-nuclear option" that could stop projects going ahead or limit expansion.

The federal resources tax is one of the main recommendations of the tax review conducted by Treasury secretary Ken Henry aimed at offsetting the rising cost of public health.

The review is believed to recommend the rate be set at 40 per cent of mining industry profits and replace state royalties, which vary around the country depending on the industry and project.

One of the reasons Mr Barnett has refused to sign over a third of his state's GST revenue to the Rudd government for health is that he fears losing mining royalties after the Henry review.

Federal government sources said Mr Barnett and other premiers had nothing to fear from the Rudd response to the review, and would keep their royalties.

Canberra sources told The Weekend Australian the federal government's response included a resources rent tax on top of state royalties and said all states would be treated the same.

It is possible the government will lower the tax rate from the expected 40 per cent to compensate for the retention of the state royalties, although the double collection is a less efficient tax method.

The new resources rent tax would be applied on all mineral and onshore gas projects, such as the new wave of coal-seam gas developments in Queensland.

Financial market analysts estimate it would cost BHP Billiton and Rio Tinto - the nation's two biggest miners - $5bn.

The existing petroleum resource rent tax on offshore oil and gas projects raises more than $4bn a year for the commonwealth.

It is understood the government has considered the possibility of returning some of the new federal tax to the major resources states, which are suffering a big loss in GST revenue via the Commonwealth Grants Commission.

This week the Prime Minister said he was confident the federal government could finalise a deal with Western Australia over its funding for the new health proposal, and conceded that the large resources states, such as Western Australia and Queensland, had particular funding difficulties.