Fortescue’s top executive is not surprised Treasury could not see critical aspects of the mining tax process.
Addressing a Senate inquiry into the mining tax, the company's chief financial officer, Stephen Pearce, said the tax is an ‘incredibly’ complicated system. He said the company had taken several years to work out what its own shelter from the tax would be.
His comments come as Treasury secretary Martin Parkinson admitted last week he could not see the size of the deductions being claimed by big mining companies, which accounts for Treasury’s erroneous forecasts of the revenue the tax would generate.
“I’m not surprised they couldn’t see it…it has been very hard for us to see it,” Pearce said.
The SMH reported Fortescue had an ‘unrecognised tax benefit’ of about $3.5 billion that would guarantee the company did not may any mining tax in the near future.
But Pearce said the company had spent between $3 million and $5 million on provisions to comply with the tax, and would need to spend hundreds of thousands a year to fulfil it.
The underperformance of the mining tax seems to be due to lower commodity prices and multibillion-dollar deductions miners are claiming for money spent on building the mines before the tax came into effect.’
The right to claim a ‘deferred tax asset’ was brought in to guarantee the tax was not acting retrospectively on companies, but the mechanism has damaged the credibility of the tax and revenue stream.