The Melbourne Cup has been run and won, which can only mean one thing…its MRRT season!
The first legislation of the Minerals Resources Rent Tax was tabled in Parliament by Bill Shorten.
Treasurer Wayne Swan was acting as Prime Minister while Julia Gillard circumnavigates the globe, presumably not by flying with Qantas, for a series of international conferences before returning home to greet American President Barack Obama.
Unfortunately the erudite Queenslander had lost his voice and so the duty to introduce the Labor Party’s MRRT baby fell upon the dulcet tones of the Deputy Treasurer.
Unperturbed Swan faced the media to claim the mining tax will allow the community to share in the resources boom.
As the MRRT was hitting the pages of Hansard the mining industry continued to hit out against its introduction.
The Labor Government has introduced a package of 10 bills it hopes will ultimately establish the MRRT and allocate revenues gained from it.
The Bill and the Government still have to navigate the obstacle course that is consistently being rearranged by the independents, in particular the Member for New England Tony Windsor and the Member for Lyne Rob Oakeshotte, to be passed.
Windsor has thrown a last-minute Coal Seam Gas spanner amongst the nuts of the MRRT machine, while Oakeshott is trying to reassure his electorate that he is monitoring the situation.
Tasmanian independent Member for Denison Andrew Wilkie is more concerned about the threshold of the mining tax.
Wilkie has identified depreciation provisions within the tax framework favour three big companies, namely BHP Billiton, Rio Tinto and Xstrata, and has highlighted these perceived inequities to be a disincentive to smaller miners.
“I’m hopeful they can make some adjustment to accommodate my concerns … I want small miners to succeed and become big miners,” he told a gathering of reporters in Canberra.
The nuts and bolts of the MRRT represent a 30 per cent tax that will apply to the extraordinary profits of coal and iron ore miners from 1 July 2012.
The tax will apply to those mines that fit into the category of being the most highly-profitable after extraction.
The tax will however, allow new investment to be written off.
It will only apply to smaller miners once they have made enough profit to pay off their initial investments.
In a bold display of political table thumping Swan claimed the MRRT was a historic reform to the country’s taxation system that would add strength across the entire economy.
“Australians know how important the mining industry is, but they also know that we can only dig up and sell the resources once,” Swan said.
The Government has promised revenue from the MRRT will fund a cut in the corporate tax rate, provide tax breaks for small business, boost the savings of retirees’ savings and assist with critical infrastructure projects.
The introduction of the Bill woke the voices of industry from their recent silence on the subject with the Association of Mining and Exploration Companies chief executive officer Simon Bennison leading the pack.
“The discriminatory and anti-competitive nature of the Government’s proposed mining tax on small emerging miners continues to be ignored in the latest Minerals Resource Rent Tax legislation tabled in Parliament today,” Bennison said.
“Despite consistent requests made by AMEC, the Federal Government still chooses to ignore the significant effect the MRRT will have on small emerging Australian miners, and our many concerns and recommendations have gone unheard.
“AMEC continues to oppose the MRRT as it is ill conceived, discriminatory, punitive, complex and a short term tax grab that does not look at the effect of the proposed mining tax on Australia’s international competitiveness and sovereign risk.”
Bennison said a number of the body’s concerns could be addressed by an increase of the profit threshold to $500 million, which he said would represent a production level of approximately 10 million tonnes per annum.
“Many AMEC members are already experiencing problems raising capital for projects in Australia and are looking to transfer their work to overseas jurisdictions that are also resource rich,” Bennison said.
“Hopefully, the Australian Government and knowledgeable members of Parliament will recognise the damage the MRRT will cause to our Nation’s future, and remove this bad tax from the legislative agenda before it is too late.
“If these concerns cannot be addressed, and included in the legislation, it is still not too late for the Australian Parliament to reject this discriminatory, complex and bad tax.”
The association went as far as to support the exclusion of magnetite concentrate from the MRRT legislation, as this signalled some recognition of the extensive beneficiation process of low value magnetite.
Major iron ore producer Fortescue metals group chairman Andrew Forrest identified a glaring example of the unfairness of the MRRT to be that it would be paying less tax than its junior counterparts.
“We cannot have an unfair tax,” Forrest said.
“Being ill conceived, poorly negotiated by Government and finalised in a shroud of secrecy and exclusiveness with the world’s biggest mining companies, this tax is unfair and a penalty on smaller mining companies.”
Forrest said the MRRT will ensure the three biggest mining companies in the world would have an unfair disadvantage in the market place as they will be able to reduce their overall unit cost compared to the smaller miners.
“It will reduce investment in Australia,” Forrest continued.
“This will happen measurably and instantly for early stage iron ore and coal projects as investors are encouraged to invest in projects and employment opportunities away from Australia.”