New South Wales will not join Resource Tax challenge

July 9, 2012

The New South Wales (NSW) government in Australia will not join with Queensland and Western Australia in the High Court challenge that was spearheaded by Fortescue Metals Group against the constitutionality of the minerals resource rent tax because NSW feels the challenge has little chance to succeed, Reuters reported.

The Premier, Barry O’Farrell, sought advice from the Crown Solicitor in March about joining the challenge after discussions with the then Queensland opposition leader, Campbell Newman.

The NSW government estimates that the mining tax revenue from companies in NSW will be about $450 million a year in its initial years. The government will not release the legal advice, it is understood to conclude that any challenge would have a minimal chance of success.

Fortescue will argue that the mining tax, which the federal government hopes will raise $13.4 billion over the next four years, discriminates between states and impedes their ability to encourage mining.

The Queensland government will put its own arguments forward and announced that it it would intervene in the case, but it will not formally join the Fortescue challenge.

The WA Premier, Colin Barnett, confirmed it would also intervene in the challenge.

A spokesman for O’Farrell said NSW would “closely monitor” the proceedings.

With the tax forecast to raise $3 billion this financial year, a successful challenge could threaten federal Labor’s vow to bring the budget back to surplus.

However, the federal Treasurer, Wayne Swan, described the challenge as “futile.” He was “very confident” the government’s position would be upheld in the High Court, and had received legal advice that the Commonwealth would succeed.

The decisions come as the federal government seeks to revive its fortunes by arguing that the mining tax will spread natural resource wealth across the community through cash handouts and business tax cuts.

The Opposition Leader, Tony Abbott, would not be drawn on whether the interventions were appropriate use of taxpayers’ money, but reiterated the Coalition’s plan to remove the mining tax. “There is no doubt that the mining tax particularly targets the resource rich states and if the states in question wish to challenge it in court, that’s a perfectly reasonable thing for them to do,” he said.




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