07/11/2011 - 14:11

Calls for new mining tax rules

07/11/2011 - 14:11

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Accounting firm BDO has released updated modelling on the impact of the Minerals Resource Rent Tax (MRRT) which it said confirms that smaller miners will pay a higher rate of tax than the country’s largest miners.

The report has been used by an alliance of iron ore miners to lobby for changes to the tax, to address what they say is its unfair impact.

Fortescue Metals Group chairman Andrew Forrest is leading the campaign, even though he expects Fortescue’s tax bill under the MRRT will be close to zero.

He told a teleconference that other large miners are also protected from the tax, “and we don’t think that is fair”.

Fortescue’s preference is to scrap the tax, but his fallback is that the tax rules should be modified.

The federal government insists that BHP Billiton, Rio Tinto and Xstrata – which negotiated the new tax last year - will pay the bulk of the MRRT.

BDO corporate tax director John Murray said: “The modelling proves the MRRT hits small miners and leaves alone the big established miners with big established profits.”

“The addition of safeguards to protect smaller mining companies, such as timing and rate parity, would make the MRRT significantly fairer,” he said.

BDO has proposed that the MRRT only becomes liable to be paid in the year following the first year Rio Tinto, BHP Billiton or Xstrata become liable for payment of MRRT, and that the timing is applied to iron ore and coal separately.

It has also recommended that the rate of MRRT payable by taxpayers should not exceed a benchmark rate calculated by reference to the highest of the MRRT liabilities for Rio Tinto, BHP Billiton and Xstrata for the preceding MRRT year, to each class of taxable resource (either coal or iron ore).

An alternative is that all companies will pay instalments and on receipt of the MRRT returns the cap referable to any of Rio Tinto, BHP Billiton or Xstrata could be applied in assessing the current year of tax.

Mr Murray said the modeling used publicly available information and he believed it was conservative.

In contrast, he said the Treasury had not released assumptions underpinning its estimates, which made it difficult to undertake a like-for-like comparison.

“We’ve shown ours and we want the government to show theirs,” he said.

Mr Murray said that if the government’s projections are correct, the proposed amendments would have no impact on revenue flows.

 

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