The new draft of the Minerals Resources Rent Tax (MRRT) has been met with criticism from many of Australia’s miners.
Andrew “Twiggy” Forrest told a news conference over the weekend that his company, Fortescue Metals Group (FMG) will be hit the hardest by the revised tax, which proposes a 30 per cent tax on iron ire and coal mining profits.
"BHP (Billiton) , Rio Tinto and Xstrata were able to avoid most of this tax because they were all in the room when this tax was decided," he said.
He says he is considering taking his argument to the High Court if the government does not rewrite the draft laws to make BHP, Rio and Xstrata par more under the levy.
Forrest will hold talks with Opposition leader Tony Abbot, resources Minister Martin Ferguson and independent MP’s Andrew Wilkie and Bob Katter in Canberra today.
"If that is what finally appears, you may be assured that Fortescue and others will challenge a precedent so dangerous that it gives multinationals a major advantage over Australian home-grown companies," he said.
BHP has welcomed the draft amendments to the tax.
In what the government has labeled the “improved resource tax arrangements”, mining companies with less than $50 million assessable profits per annum will be excluded from the mining tax.
“The MRRT will provide transferability of deductions,” a Treasury statement says.
“This supports mine development because it means a taxpayer can use the deductions that flow from investments in the construction phase of a project to offset the MRRT liability from another of its projects that is in the production phase.”
Australia’s biggest miners have been hit harder than expected by the changes to the tax, with restrictions to deductions for mining companies with multiple projects.
But big mine companies have extensive projects often covering several mining leases.
Traditionally this would have been treated for accounting purposes as one project, but under the new laws, each lease will be valued individually to work out an overall value of a project.
Industry experts told The Australian this could lead to companies having to value their projects at a lower amount, resulting in lower deductions for depreciation.
The government says it will “recognise the particular characteristics of different commodities, by applying a taxing close to the point of extraction.”
It says it will use appropriate pricing arrangements to make sure only the value of the resource extracted is being taxed.
The changes also include the extension of the Petroleum Resource Rent Tax for all oil and gas, onshore and offshore.
The tax rate of the PRRT will be 40 per cent under the new proposal and all state and federal taxes will be creditable against current and future liabilities from a project.
The demand for resources, particularly from India and China is expected to increase and according to Treasury, the tax on profits will result in increased infrastructure and jobs at home.
State governments currently tax resource projects through state royalties, based usually on a fixed percentage of the value of production.
The federal government says a profits-based regime is “more appropriate” in periods of high profits, including the current mining boom.
But the Association of Mining & Exploration Companies, which represents the smaller end of the sector, told The Australian the tax plays favourites with the mining giants who created the tax in consultation with the Prime Minister.
"The 150-plus pages of the exposure draft highlights the complexity of this poorly designed tax," AMEC chief executive Simon Bennison told The Australian.
"AMEC continues to consider the MRRT to be ill-conceived and poorly designed to such an extent it should be withdrawn."
The MRRT draft legislation has been released for public consultation and comment until 14 July, with the PRRT to be released by mid-2011.
The legislation implementing the new taxes is expected to be introduced to Parliament at the end of this year.