The resources industry is urging the federal government to tread carefully as it attempts to plug holes in its budget, due to be handed down early next week.
Labor estimates revenue will come in around $12 billion less than predicted in its mid-year budget review, leading to widespread speculation of changes to taxation regimes in the resources sector.
The budget is expected to be a far cry from the surpluses promised by federal Treasurer Wayne Swan after he handed down the 2012/13 budget.
Schemes expected to be in Labor’s sights for cutbacks include exploration deductions, diesel fuel rebates and the thin capitalisation ratio.
Chamber of Minerals and Energy chief executive Reg Howard-Smith said any knee-jerk reaction that would stifle the resources industry would not achieve the aim of increased revenues in the longer term.
“Any tax law amendments that bring about further costs to the resources sector, which is already dealing with significant increases in the coast of doing business, need to be shelved,” Mr Howard-Smith said in a statement.
“The sorts of taxation changes which have been subject of much speculation aren’t based on sound tax policy and will ultimately hurt Australia’s competitiveness.”
Association of Mining and Exploration Companies chief executive Simon Bennison said he was alarmed at the possibility of changes to resources tax arrangements, particularly any further erosion of diesel fuel tax credit arrangements.
“Noting that diesel can contribute up to 25 per cent of the costs of a typical mining project, any further reduction in the current credit arrangements would be disastrous,” Mr Bennison said.
“The diesel fuel tax credit should be reinstated to pre-carbon tax levels, and not reduced any further.”
Mr Bennison said the exploration and mining sector was currently facing difficulties raising capital, high profile expansion plans had been cancelled or put on hold and staff have been laid off.
“Now is not the time to introduce policy change that further discourages investment flowing to Australia and continues to make the industry internationally uncompetitive,” he said.
“The government should focus on growing the mining industry through the exploration sector. The emphasis should be for new discoveries to create employment and revenue for the future.”