NSW slugs miners with royalties hike

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NSW Premier Barry O’Farrell will today follow Western Australia’s lead and increase mining royalties in the state budget.

In yet another hit to miners, Treasurer Mike Baird said the royalties rise would only apply to companies subject to the Federal Government’s minerals resources rent tax.

As Canberra is promising to refund state royalties to companies under the MRRT, the bills for the rises will ultimately be picked up by the Commonwealth.

The rise is set to cost the federal government almost $1 billion and put NSW at risk of retaliatory cuts to GST payments and infrastructure funding from the Commonwealth.

The decision comes despite assurances Treasurer Mike Baird made in May after WA Premier Colin Barnett increased royalties that NSW had “no plans” to follow suit.

Baird and O’Farrell argue the rise is necessary to offset the cost of the carbon tax, which they estimate will cost the state $950 million over the next four years.

Baird said because the Federal Government had not offered any alternative reimbursement from the carbon tax NSW had no choice but to increase mining royalties.

“In the absence of an alternative proposal from the federal government, NSW is left with no other choice,” he said.

O’Farrell said the Federal Government had not offered enough support and guidance to NSW over the carbon tax.

“So far, the Commonwealth has refused to discuss the impact of the carbon tax on our budget, income and assets and we think this is simply unacceptable,” he said.

Royalties in NSW currently range from 6.2 per cent for deep underground coal to 8.2 per cent for open-cut coal.

The NSW State Government said the size of the latest increase will be negotiated with miners once legislation is finalised later this year.

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Earlier in the year Federal Treasurer Wayne Swan and Barnett clashed over royalties promises, and Barnett questioned weather the Commonwealth had the ability to withhold GST payments from the State.

The mining tax is due to begin on July 1 next year and raise $11 billion in its first three years.

The WA royalty rise, which also starts from July 1, will reduce that by $2 billion.

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