Proposed WA iron ore tax could cost thousands of jobs

According to the ABC, the Minerals Council of Australia (MCA) has savaged the Western Australian Nationals’ proposed iron ore tax, saying it commissioned a report by Deloitte Access Economics that found the new tax would cost 7,200 jobs.

However, Nationals leader Brendon Grylls, who is pushing for a lift in production taxes for BHP Billiton and Rio Tinto from 25 cents to $5 a tonne, claims it will raise an additional $7.2 billion over four years.

Grylls has dismissed the research by Deloitte Access Economics claiming it was “paying for misleading analysis of the policy”.

The Deloitte report, WA Iron Ore Royalty Analysis, found the proposed tax would see the Australian economy could shrink by $2.9 billion per year as a result of a tax that is supposed to raise $2.3 billion.

At the same time, the research also found the WA economy would be the biggest loser and there would be a 4.3 per cent reduction in employment across the Pilbara, the ABC reports.

According to the news report, MCA chief executive Brendan Pearson said “In raising all that extra revenue, it will harm one of Western Australia’s most important industries, that iron ore sector, and cost jobs in WA itself, so it’s really a no-brainer in terms of bad ideas.”

For his part, Grylls said that he “absolutely refutes” the job loss figures quoted in the report.

Australian Mining reported last month that job losses was just one issue bedevilling the proposed tax.

According to that story, under Section 90 of the Australian constitution, states are not allowed to introduce taxes on the production, manufacture, sale or distribution of goods.

Moreover, Murdoch University law lecturer Lorraine Finlay told the ABC, that the production rental levy [i.e. tax] “is really an excise duty dressed up as a levy and if the High Court held that that was the case, then the levy would be constitutionally invalid.”

So even if the tax was not unconstitutional, which be all accounts it seems to be, then it could also be uneconomical.

In other words, a lose-lose situation for all involved.