From Mining Journal:
The tax would make Australia the world’s highest taxing iron-ore jurisdiction, according to a new study commissioned by the Minerals Council of Australia (MCA) and WA’s Chamber of Mines and Energy.
“The imposition of an additional $7.2 billion tax would increase the marginal effective tax rate on iron ore from 37% to 45%, and would be three times larger than that of Brazil,” said the mining organisations.
BHP Billiton and Rio Tinto have already slated the plan, warning of job losses.
The study was led by Dr Jack Mintz of the School of Public Policy at the University of Calgary in Canada.
Mintz was said to have developed one of the world’s most comprehensive and sophisticated data-sets of national corporate taxation regimes and previously chaired a detailed major inquiry into Canada’s corporate tax system.
“The study comprehensively debunks Grylls’ claim that Western Australia’s iron ore sector is lightly taxed. The study finds that WA already imposes the largest royalty burden in the world and that the new tax would equate to an effective doubling of the overall royalty rate in WA on iron ore,” said Brendan Pearson, CEO of the MCA
He also said: “The Grylls tax would represent a gold-plated gift to Australia’s iron ore competitors, most notably Brazil. With iron ore accounting for 16% of Australia’s export income, this tax would represent a massive self-inflicted wound on both the national and Western Australian economies,”
Reg Howard-Smith, head of the regional chamber of mines, said. “Western Australia would officially become the least attractive destination for investment in the world. It would undo, in one fell swoop, the efforts of successive Western Australian governments of both political persuasions to develop the great iron ore province of the Pilbara,” he said.
“His claim that major iron producers only pay a rental of $0.25 per tonne for iron ore production is wrong. The truth is that major WA producers’ total royalty and income tax contribution to the state and federal governments is $17.50/t.
Come now. This debate is not about the relative levels of taxation across jurisdictions. Strayan dirt is the finest in the world. It’s not going anywhere regardless off tax levels.
WA is clearly not charging high enough royalties when BHP and RIO are operating on margins well north of 100%:
These are super profits 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. It’s depleting nature needs to be reflected in the revenue being received by them.
This debate is about equity and investment. First, the Australian people should be getting more. Second, the amount should be calibrated so that BHP’s and RIO’s competitiveness is not adversely impacted causing them to lose volumes (and investment). That level is more like $2.50 per tonne than the $5 which would put them on par with Vale, from UBS:
I would like to see Mr Grylls also commit to paying down debt with the windfall (or 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.
