QLD mining industry urges against tax rises

Queensland’s mining sector is urging the Newman government to not raise taxes or charges in next week’s budget, claiming it will hurt the industry.

Mining groups say slugging the industry with tax increases to plug large deficits expected over the coming years will make the industry uncompetitive.

According to the AFR, Queensland Resources Council chief Michael Roche said the coal sector was already struggling to compete internationally.

He has asked the government to index royalty rises to inflation, a move which will reportedly cost $40 million in its first year.

Although the LNP government has said it will not increase coal royalties, the industry  is worried that “backdoor tax increases” to user charges such as safety and health levies are likely.

Fears of levy increases comes after Northern Territory miners were this week sprung with a new levy which will see the value of the state’s environmental bonds reduced by 10 per cent, and an annual 1 per cent tax would be levied on the remaining 90 per cent.

Local miners said that it would increase financial burdens and red tape hassles at a time when the Territory is attempting to ramp up exploration efforts.

"At the moment, industry is being hit by a heap of other costs, so the last thing it needs is something like this," Association of Mining and Exploration Companies chief executive Simon Bennison said.

Bennison has called on the Territory government to urgently review its plans.

And with massive holes that also need filling the federal budget, the industry said that overseas rivals were continually looking like better options for investors.

Last week Australian Mining reported that the federal government is expected to announce two tax changes that will affect the mining sector

Business tax breaks are expected to be changed, including the “thin capitalisation” rules and exploration tax concessions.

Presently, companies which are highly geared are entitled to significant tax reductions and minimal amounts of tax being paid.

Changes will effectively halve the current ratio of debt to equity rules from 3:1 to 1.5:1.

On exploration, it is believed the government will reverse a 2001 budget decision which allows major miners to write off the cost of buying smaller players who have undertaken exploration activities. It is estimated savings from the measures could amount to $500 to $900 million over four years.

While changes to thin capitalisation rules have been estimated to save $2 billion.

Chief of the Minerals Council of Australia, Mitch Hooke, said that new taxes in the industry would hurt Australia’s global competitiveness and said the industry was opposed to both of the proposals.

“Altering the thin capitalisation and exploration deduction provisions are a naked tax grab. They are not concessions or loopholes. They are critical features of the business tax system.

“Exploration is the nursery of Australia's mining industry. Adding a new impost at a time when Australia's share of global exploration spending is falling and costs in general are escalating dramatically is the wrong way to go.”

Hooke said the government should be creating sustainable fiscal policies which would encourage investment.

“Confidence to invest is critical if Australia's economy is to continue to grow. New business taxes are precisely the wrong signal to be sending to foreign investors,” Hooke said.

“The Government should be focussing on boosting economic growth through policies that cut costs, improve productivity and reduce sovereign risk. Instead they are headed in the opposite direction.”

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