According to John Kunkel, the acting chief executive officer of the Minerals Council of Australia, the Federal Budget smacks of blame shifting aimed at papering over a failed fiscal strategy. And higher taxes compromise the industry’s ability to deliver future investment and jobs.
Kunkel said that the Federal Government has again put the squeeze on business to fund future spending and fails to recognise that Australia?s business tax regime is increasingly uncompetitive. He charged that the Government has spruiked the mining investment pipeline for all its worth, and is now driving up taxes on investments at the precise time when global markets have made them higher risk.
He said that changes to exploration tax arrangements struck at the high risk nursery of the mining industry and the right to explore should be deductible along with other exploration expenditure.
?Australia?s share of global mining exploration expenditure has declined in recent years and this measure only increases effective tax rates on explorers,? Kunkel said. ?Fiscal stability is critical, given the time horizons for mining investment are so long.?
Independent modelling by Macroeconomics has shown that the mining boom has tipped around $160 billion into Commonwealth revenue from 2004 to 2011. The minerals industry is contributing an estimated $20 billion in company tax and royalties this financial year. The industry?s effective tax rate (company tax and royalties as a share of taxable income) has averaged 41.6 per cent since 2001-02.
Tax Office data for 2010-11 released last month has also confirmed that mining pays a net corporate tax rate more than 18 per cent above the all industries average. This is before royalties, the carbon tax and the Minerals Resource Rent Tax.
Commenting on the Federal Budget measure to spread the deduction for purchasing mining rights and information used for exploration over 15 years, KPMG?s Energy & Natural Resources tax lead Rod Henderson said: ?The measure takes effect from 14 May 2013 but the details are subject to consultation with submissions due 12 July 2013, which raises a question as to when these measures will be passed into law, noting that Parliament will be prorogued prior to the September 14 election.
?As companies approach key financial reporting dates they will need to carefully consider the financial reporting impacts. Under the current law, they can claim an immediate deduction for the purchase price of exploration rights and information first used for exploration but this could be clawed back and spread over 15 years if these measures subsequently pass into law.?
Consult Australia lamented that the Budget has failed to invest in those parts of the broader economy best placed to provide growth for the future. ?The Government?s continued investment in Infrastructure Australia should be applauded as it continues to recognise the importance of providing confidence and certainty in what is a nationally significant pipeline of projects,? said Consult Australia?s chief executive Megan Motto.
?These are long term no-brainer investments. They should be supported by state governments, and will repay themselves easily through an improved flow of goods and services in our cities and regions. However, there is a missed opportunity in the Government?s belated recognition of the need to identify new funding and financing arrangements to help attract private sector investment to the infrastructure pipeline in the long term. Of particular concern, the case for leveraging private financing to support smaller scale infrastructure projects is ignored.?
Sources: Minerals Council of Australia, KPMG, Consult Australia