From Bloomie:
Regulators are working on a plan to shift the current volume-based taxation to price-based, China Business News reports, citing Lei Pingxi, executive vice chairman of the China Metallurgical Mining Enterprise
The reform may help ease mining company’s tax burden amid falling iron ore prices.
What a choking irony. It was Australia’s giant iron ore miners that trashed the equivalent Australian tax, insisting that it would deter their expansion plans, and now the Chinese rivals they are trying to put out of business with that excess supply will be supported by a Chinese version.
As Craig Emerson argued today at Gina’s mining newsletter:
As world iron ore and coal prices slump, the inefficiencies of the state royalty regime are again being laid bare. A shift to a profits-based royalty system could lift both state government revenues and after-tax mining returns.
..One reason why the resource super profits tax and its successor, the minerals resource rent tax, failed is that they did not involve an accommodation with the states. Western Australia and Queensland hiked their production-based royalty rates to collect as much of the resource rent for themselves as they could. At record high mineral prices, this was manageable – every tonne of production was making good profits.
Now the states are facing disappointing revenues from falling mineral prices.
They will inevitably be confronted with industry complaints that the high rates of production-based royalties are forcing them to close mines.
There is a respectable view that the best step companies operating marginal iron ore and coal projects can take is to abandon them and return to shareholders the retained earnings from better days. That would help deal with the problem of global oversupply and plummeting prices. But achieving that result through poorly designed royalty regimes would take us back to the early 1980s.
RSPT, anyone?
