Australia's new mine tax fails to raise any revenue
Australia’s mine resource rent tax (MRRT), the tax on profits generated from the exploitation of non-renewable resources, that was passed earlier this year has failed to raise any revenue.
BHP Billiton, Rio Tinto and Xstrata, the biggest mining companies in Australia and those that were expected to the pay the lion’s share of the tax, have no liability under the minerals resource rent tax so far in 2012-2013 and the government did not receive any revenue by the payment deadline Oct. 22, The Australian reported.
Tax revenues are also down from the oil and gas sector through the petroleum resource rent tax, and the mining companies - the biggest contributors to corporate tax - are warning that price cuts, the high dollar and falling profits will drastically reduce their company tax contributions.
The MRRT is designed to levy a 30 percent tax on the “super profits” from companies who reach a profit of $75 million from mining in Australia.
The government has already slashed predictions for the MRRT revenue in 2012-2013 from $3.7 billion at the May budget to just $2 billion it its mid-year economic forecast, which was prepared before the mining giants confirmed there would not be any payments under the tax.
It was publicly estimated that BHP Billiton and Rio Tinto alone would provide between $1 billion and $1.5 billion in MRRT payments in 2012-2013 but this now seems unlikely to be reached given that the first quarter has passed without payment and low commodity prices are predicted to continue.
The Mid-Year Economic and Fiscal Outlook, which did not include the mining tax result, warned “weak external conditions are expected to affect mainly company profits, largely in the resource sector, resulting in substantial downgrades to company tax receipts.”
“The falls in commodity prices have also led to significant downgrades to resource rent tax receipts,” the report said.
Mining industry sources are suggesting company tax from the resources sector will be cut by much more than the government’s estimated $2.3 billion drop from the budget to the MYEFO report. However, the Treasurer remains confident the lower revenue target of $2 billion from the mining tax will be met this year.
While not commenting on individual tax returns from companies, a spokesman for Treasurer Wayne Swan said: “The projected revenue from the MRRT was written down in our mid-year update by $4.3bn, reflecting weaker market conditions, and we stand by those forecasts. The MRRT is a profits-based tax that raises more revenue when profits are higher and less when they are lower and that's the whole point of the tax."
Originally the MRRT was designed to collect $10.6 billion over four years from July 1 in an attempt to spread the benefits of the mining boom as well as to help cut the company tax rate, fund superannuation and provide infrastructure spending in the regions. It was also an integral part of the government's plans to return the budget to surplus in 2012-2013.
Because of low commodity prices, Rio, BHP and Xstrata - which account for more than 90 percent of the revenue - all expect to pay less.
The first quarter’s payment of the MRRT was also supposed to be based on an annual estimate of liability, divided by four, to provide a quarterly rate.
Rio, BHP and Xstrata drafted the MRRT with Swan and Julia Gillard after the removal of Kevin Rudd and the mining sector's campaign against his resources super-profits tax.
The revised tax allowed for companies to be reimbursed for state royalties. Miners have complained about royalty hikes by the states as revenue-raising but the federal government is committed to reimbursing them for the royalties.