From the AFR:
The man at the helm of BHP Billiton’s vast iron ore assets, Mike Henry, has warned that regional West Australians will be hit the hardest by a mining tax that would also threaten its dividend payout, expansion projects and community spending.
In his first public comments since Nationals WA leader Brendon Grylls proposed a $7.2 billion tax against BHP and Rio Tinto, Mr Henry said suggestions the miner was paying 25c per tonne in royalties was “a bit rich” and a “red herring”.
Mr Grylls wants to lift a production levy from 25¢ per tonne to $5 per tonne.
“I am confident that Brendon Grylls and the National Party know that we are not just paying 25¢ per tonne in taxes,” Mr Henry said.
“We are paying about $5 per tonne in royalties already. Our overall taxes per tonne of iron ore in 2015 were about $17.50 per tonne. The focus on 25¢ per tonne is a bit rich.”
Perhaps, I won’t argue that the case has been well prosecuted. It hasn’t. There’s been no discussion of the inter-generational equity in resource taxation. No discussion of inappropriate miner rents. And little discussion of what should be done with the money. Instead there’s been a grab-bag of drivel about a GST rip-off and perhaps money for regions.
But, the case for higher royalties is there. WA is clearly not charging high enough royalties when BHP and RIO are operating their iron ore businesses on margins well north of 100%:
These are “economic rents” and the people of Australia are being reamed for the privilege of developing their dirt. Remember that this is a non-renewing natural resource owned by the people of WA and Australia. It’s depleting nature needs to be reflected in the revenue being received for their development.
I would like to see WA Nats also commit to paying down debt with the windfall (or to invest it strictly in infrastructure or an SWF). If the debate is about equity over generations then the revenue should be accordingly distributed over time.
As it stands at $5 the levy is too high. The amount should be calibrated so that BHP’s and RIO’s competitiveness is not adversely impacted causing them to lose volumes (and therefore investment). That level is more like $2.50 per tonne than the proposed $5 which would put them on par with Vale, from UBS:
Meanwhile, BHP mulls subverting democracy a second time, from The Australian:
BHP Billiton will weigh up an advertising blitz similar to the one that helped destroy the first Rudd government as it seeks to counter the “red herrings and furphies” behind the West Australian Nationals’ $5 per tonne iron ore tax proposal.
With a WA election just months away, BHP’s Australia chief Mike Henry told The Australian that an advertising campaign was one option being considered to help explain the miner’s true tax position and counter the growing grassroots momentum behind the proposal.
Give us all a break.
