Planned changes to stamp duty could impede takeovers of mining companies and other ‘land rich’ companies in Western Australia, business advisers have warned.
Mine takeover tax fear
Planned changes to stamp duty could impede takeovers of mining companies and other ‘land rich’ companies in Western Australia, business advisers have warned.
Under the planned changes, takeovers of listed companies in which land or mining tenements represent 60 per cent of company assets will be subject to stamp duty at a rate up to 6 per cent.
This means an acquirer of a listed explorer with a project worth $50 million would have to pay an additional $3 million in stamp duty.
Ernst & Young principal Scott Grimley said this measure was without precedent in any other State.
“Based on our involvement in many takeovers of listed companies in WA, the pricing of takeovers is a finely balanced exercise,” he said.
“An impost of this magnitude is likely of itself to make many takeovers of listed companies with mining and other property interests in WA untenable.
“This measure is also likely to adversely prejudice listed companies that operate in WA in favour of those that operate in other Australian jurisdictions.”
Mr Grimley said the market could discount the valuation of WA-based mining and property companies.
The new stamp duty rules are part of the Western Australian Government’s business tax reform package, which has been implemented progressively over the past year.
This measure was designed to broaden the conveyance duty base to compensate for other measures that reduced the State tax base.
A spokesman for treasurer Eric Ripper said an industry reference group endorsed the package.
“Clearly, some sectional interests will find some measures unpalatable but the Government and the industry reference group took a broader view that the package as a whole was in the interests of the economy,” the spokesman said.
The inclusion of ‘land rich’ companies (and unit trusts) in the tax base is designed to capture corporate transactions that are constructed to trade in large quantities of land without incurring the duty that any other citizen would be expected to pay.
The proposed change, which is currently being debated in State Parliament, is estimated to raise $6.1 million in 2004-05.
The treasurer’s spokesman said “the estimated revenue is consistent with what could reasonably be expected in an average year”.
He said duty on ten takeovers of small ($10 million) mining companies would raise close to the revenue estimate.
Alternatively, duty on a single medium to large takeover worth $100 million would also result in duty close to the estimate.
Deloitte senior manager Peter Katz questioned the revenue estimate.
He said he recently worked on a matter (that did not proceed for other reasons) that would have resulted in a stamp duty bill of $40 million.
Mr Grimley said the proposed change needed to be thoroughly considered and debated by parliament.
“In this respect, as the stamp duty revenues are regularly exceeding estimates, is the measure still necessary?” he asked.
