Gillard blames states for failed mining tax

Julia Gillard has blamed the state governments for the failed mining tax as new calculations reveal it is likely to raise less than $88 million.

This week the government revealed the MRRT raised only $126m in its first six months of operation, however analysts now say the net contribution will be $40m lower because miners will use their mining tax payments to reduce their company tax, The Australian reported.

When the MRRT was reworked in 2010 following the axing of Kevin Rudd, the government agreed that all state royalties rises would be footed by the commonwealth.

This led to states governments upping royalty rates in the knowledge that the Federal Government, not the mining companies, would pay.

Gillard has cited the recent review of the GST that found the trouble over the mining tax and royalty rates was "unsustainable and undesirable".

"Through the heads of treasury process, we will work on that with state counterparts in coming months," she said.

The review recommended giving mining companies a fixed credit of 5 per cent of their sales instead of offsetting state royalties which are 7 per cent or more.

However, Minerals Council of Australia chief Mitch Hooke has warned changes to the MRRT would hurt the industry.

“Full crediting of royalties is a key feature of the MRRT's design, one that ensures double taxation is avoided and that delivers a measure of stability and predictability to the overall tax burden on coal and iron ore projects, which are already at the upper end of global mining tax rates,” Hooke said.

“Even before the introduction of the MRRT, coal and iron ore were among the highest taxed industries in Australia based on the two main fiscal instruments used to collect mineral resource revenues – State and Territory royalties and Commonwealth company income tax.”

“We should be looking at how we can be internationally competitive for investment and jobs for the benefit of Australians today and future generations rather than how we can keep carving up the pie.”

Opposition assistant treasury spokesman Mathias Cormann said the mining tax’s failure is because of the way it was negotiated.

"The government negotiated it personally, exclusively and in secret with the managing directors of the three biggest mining companies. They didn't have commonwealth officials in the room, and they made a number of very costly promises," he said.

"The MRRT was a fiscal train wreck in the making."

The government is also under pressure from The Greens to make changes to the tax after revelations it was billions of dollars short of its predicted revenue target.

Proposed changes include increasing the tax rate to 40%, cutting Commonwealth refunds of state royalty increases and including other minerals as part of the tax.

However a spokesman for the Treasury has said that while the loopholes in the tax were being discussed with the states governments, there were no immediate plans to change the MRRT.

Image: fiveaa.com

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