Fortescue Metals Group is likely to back a constitutional challenge to the federal government's minerals resource rent tax, its chief executive Andrew Forrest said today.
Fortescue Metals Group is likely to back a constitutional challenge to the federal government's minerals resource rent tax, its chief executive Andrew Forrest said today.
Mr Forrest was responding to the draft MRRT legislation, released on Friday, which he described as "economic vandalism".
He repeated his long-held view that the tax imposes a harsher burden on emerging mining companies compared to BHP Billiton, Rio Tito and Xstrata, which negotiated key terms of the MRRT with prime minister Julia Gillard last year.
"What we have in the MRRT is a secret deal between the Government and three big multinational mining companies," he said.
"It was designed to deliver benefits solely for those three companies and in return assist the government to ultimately win an election.
Mr Forrest told a teleconference today that the draft tax penalised emerging companies in two ways.
First, the established miners can "uplift" the value of their assets to current market values, which would enable them to make large depreciation claims.
Second, interest expense is not deductible, and this would penalise smaller firms that are more reliant on debt funding, compared to established miners that have the ability to fund projects off their own balance sheet.
"It means I pay much more tax per dollar of profit than either BHP or Rio of Xstrata. That is simply outrageous," he said.
When asked about a High Court challenge, he said that: "as it stands now, any Australian who has a tax which allows multinationals to pay less per dollar of profit than what they do, that should be challenged, that is totally against the constitution".
"If that is what finally appears, you may be assured that Fortescue and others will challenge a precedent so dangerous that it gives multinationals a major advantage over Australia home grown companies."
Mr Forrest and other Fortescue executives will meet in Canberra tomorrow with treasurer Wayne Swan, resources minister Martin Ferguson, Independents Bob Katter and Andrew Wilkie, and opposition leader Tony Abbott to voice their concerns about the MRRT.
Mr Forrest expressed disappointment at the incomplete nature of the draft legislation, which includes 170 pages of appendices covering 161 pages of draft legislation.
Mr Swan said on Friday that the government welcomed public submissions, which are due by July 14.
"The draft is not exhaustive and is intended to provide stakeholders with an early overview of the legislation. We encourage stakeholders to make submissions on the preliminary draft," he said in a statement.
The Chamber of Commerce & Industry WA and the Association of Mining & Exploration Companies have already expressed concern about the draft legislation.
CCI chief executive James Pearson said the tax - which seeks to raise $10.5 billion in its first two years - should not be rushed into law before potential alternatives are properly considered and the impact it will have on one of Australia's most important industries is fully understood.
He said the CCI has consistently called for the mining tax to be considered as part of broader reform at the National Tax Summit in October.
"There is little support in the local business community for a tax that will return only $200 million a year over 10 years to fund infrastructure when an estimated 65 percent of the mining tax will be derived from WA," Mr Pearson said.
"This is a small amount for a large State with big infrastructure needs, especially when up to 65 per cent of the MRRT, and the expanded petroleum tax, will be raised from WA."
AMEC chief executive Simon Bennison said emerging iron ore and coal miners still face a long period of uncertainty on how the new tax regime will work.
"The 150 plus pages of the Exposure Draft highlights the complexity of this poorly designed tax. The draft Explanatory Material is already 171 pages long and explanatory notes on 17 parts of the legislation are listed as "still to come".
"The impact of additional record keeping and the subsequent compliance costs will be extremely onerous for these smaller and emerging companies.
"There are still many unanswered questions, many of which cannot be answered by the administrators and regulators, mainly as the MRRT is being designed on the run, and without full consideration of the issues and potential ramifications on Australia`s international competitiveness and damage to Australia`s reputation as a safe place in which to invest.
"AMEC continues to consider the MRRT to be ill conceived and poorly designed to such an extent that it should be withdrawn by the Gillard Government and remove the significant uncertainty that is directly affecting smaller and emerging miners". Mr Bennison said.
"This is a very complex, poorly designed tax and accordingly the legislation is a very complex document. The industry has been allowed only five weeks to review this complicated piece of legislation, assess the impact on their businesses and provide comment and the Explanatory Material provided is still incomplete."
