The South Australian Chamber of Mines and Energy (SACOME) has commented on the amended resources tax reform announced by the Federal Government on July 2.SACOME believes that the new proposal for a Mineral Resources Rent Tax (MRRT) for iron ore and coal only, and Petroleum Resources Rent Tax (PPRT) for onshore gas and petroleum is a fundamental improvement on the previously proposed Resources Super Profits Tax (RSPT).
The new scheme sufficiently addresses many – but not all – of the concerns held by the South Australian resources industry about the RSPT. SACOME has been calling for resources tax reform that;
• is applied prospectively
• is internationally competitive
• is differentiated by resource commodities
• is levied on primary resource value only
• is equitable
• is efficient
• includes a version of flow through shares to allow unused deductions to flow to shareholders as an exploration tax credit
• excludes extractive (low value) commodities
• recognises the high cost of capital for emerging miners(part)
The MRRT is a fundamental improvement on the previous proposal and is a positive move for the minerals industry and the communities that rely on it. The new tax proposal is broadly consistent with the minerals industry’s underlying principles of tax reform: international competitiveness, sovereign risk and competitive neutrality across company size, commodity mix and ownership structure.
SACOME said that it was pleased to see the effective tax rate for iron ore and coal is more in line with rates internationally. The exclusion of all commodities except coal, iron ore and gas recognises the principle of differentiating rates across commodities to ensure international competitiveness and means the Olympic Dam expansion won’t be directly affected.
SACOME believes that the minimum $50 million annual profit threshold before MRRT becomes payable will assist emerging miners seeking finance and that the key points on which the tax is calculated (the uplift factor, tax base and the immediate write-off of new capital expenditure) are more commercially realistic. Existing projects can reduce the starting base for the MRRT, thereby reducing the retrospective nature inherent to the RSPT. SACOME also applauded the creation of the Policy Transition Group, to be led by Resources Minister Martin Ferguson AM, and Mr Don Argus AC to further engage with industry to fine tune the tax.
SACOME still see that there are matters yet to be resolved such as the scrapping of the proposed exploration rebate without proposing a substitute. SACOME maintains the most appropriate lever to encourage investment in mineral exploration is a flow through shares scheme. They also highlight the tax impact of OneSteel’s steelwork operations and say that the Petroleum Resources Rent Tax to be extended to onshore gas projects needs to reflect the different cost structures involved. SACOME also points out that the changes to the treatment of State royalties means it’s important the State Governments do not opportunistically increase the rate of royalties.