BHP Billiton has refuted claims mining tax revenue failed to reach targets because of a design flaw, saying it is intrinsically unstable and vulnerable to commodity price movements and cost pressures.
BHP has said the issue is about curbing demand from China and an increase in cheap supplies in many markets, weighing on commodity prices while the Australian dollar remains high.
“It is in this context that the lower-than-anticipated revenue outcome from the MRRT needs to be understood- namely, when profits fall, MRRT reduces or is not payable,” BHP vice president of government relations Christian Bennett told a Senate inquiry into the tax.
“That does not demonstrate a flawed design. Rather, it is evident that profit-based taxes in the resources sector are inherently volatile and that the response of the MRRT to market conditions is an essential and desirable design feature.”
The Australian reported the chief executives of BHP, Xstrata and Rio Tinto negotiated changes to the minerals resource rent tax. One of the changes included the ability to use the market value of their assets to create their starting base to pay the tax, which will initially reduce it.
The tax office will conduct a Senate enquiry to examine the approaches miners have taken and work with the Treasury to investigate why the MRRT raised $126 million in the first six months of implementation, falling well short of the forecast $2 billion.
The BHP comments come as the Minerals Council of Australia said they feared the government will implement proposals to restrict the deductibility of exploration expenditure.
This was proposed by the government’s business-tax working group last year.
The MCA believes exploration is plummeting due to increase in red and green tape, with the number of primary laws overseeing project approvals increasing by 53 per cent since 2006.
Research commissioned by the MCA shows that other than 144 pieces of primary legislation, there are an additional 119 pieces of minor legislation, up from 66 in 2006.
Image: BHP Billiton