Plans to impose two new taxes on the resources sector as reported last week will be vigorously opposed by the Minerals Council of Australia, its Chief Executive Officer, Mitch Hooke, said. “If the government proceeds with plans for two new taxes on foreign investment and exploration, it will have introduced four new taxes on mining since 2007. It needs to get a new trick. The government should be focussing on boosting economic growth through policies that cut costs, improve productivity and reduce sovereign risk. Instead they are headed in the opposite direction.”

The proposals leaked to the media “demonstrate that our policy makers are refusing to do the hard yards of reform and are instead falling back on the lazy and counterproductive option of increasing business taxes to fund ever-increasing spending.”

The minerals industry already pays more than A$20 billion in taxes and royalties a year net of the carbon tax and the Minerals Resource Rent Tax.

“The industry’s effective tax rate – the ratio of taxes and royalties paid as a proportion of net revenues – has remained high and relatively stable, averaging 41.6% since 2001-02. Even net of state royalties, the average effective company tax rate for mining is above the average for all industries. The Government should be spending that significant revenue better, not continually asking for more.

“Altering the thin capitalisation and exploration deduction provisions are a naked tax grab. They are not concessions or loopholes. They are critical features of the business tax system.

“The Business Tax Working Group examined both of the proposals floated and shelved them. They did not recommend changing either of the measures flagged today.

“Exploration is the nursery of Australia’s mining industry. Adding a new impost at a time when Australia’s share of global exploration spending is falling and costs in general are escalating dramatically is the wrong way to go.
Confidence to invest is critical if Australia’s economy is to continue to grow. New business taxes are precisely the wrong signal to be sending to foreign investors.