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ACM Home arrow Federalism and the Mining Tax

Federalism and the Mining Tax


 

Until recently the taxation of minerals and petroleum found within the territory of a State has been a matter for the State.

Land grants within the State normally reserved minerals to the Crown. But this is to the Crown in the right of the State, not the Commonwealth.

In 2010 the Rudd government proposed a 40% super profits tax on mines and petroleum found within the territory of the States.

The miners said this would lead to a total effective tax rate of 55% which would make Australia uncompetitive. When the Rudd government fell, the new Prime minister Julia Gillard and Treasure Swan negotiated an agreement with the three largest foreign miners for a substitute tax, the MRRT. 

This will lead to a lower effective tax rate for the three foreign miners than that payable by the others including the Australian miners. 

In addition the offshore PRRT will be extended to petroleum resources found within the territory of the States. Both taxes raise important constitutional and federalism issues which are discussed here.


Federal mining tax - states outraged Print E-mail
Written by ACM   
Monday, 28 November 2011

 

 
Commonwealth v WA - tax dispute Print E-mail
Written by ACM   
Saturday, 11 June 2011
The proposed federal tax on the states’ mineral resources goes to the very heart of our federal constitutional arrangements.


Image
[ Western Australian dissatisfaction with Canberra expressed in 1930]



...minerals tax...





The argument here is not against the taxation of mineral resources. That is a matter for parliament. The question is which parliament.
That question can only be determined by constitutional and legal principles.  
 


 ...federal minerals tax...
 
The context of the present dispute between Western Australia and the Commonwealth is that in the negotiations between the Federal government and the big three foreign miners before the 2010 election, Mr Swan and Ms Gillard had  agreed they could write off increases in state royalties against the new federal tax.   

 Unlike the earlier version, the proposed tax only applies to coal and iron ore.


 
...who owns the minerals?...


An argument in this debate is that minerals (and petroleum resources) belong to the people of Australia and should therefore be subject to a federal tax.   
Any minerals reserved to the Crown under a land grant remains vested in the Crown. 

But that is not, as lawyers say, the Crown in the right of the Commonwealth. It is the Crown in the right of Western Australia. 

In other words, the minerals are held for the benefit of the people of Western Australia - as determined by the Parliament of Western Australia. 
The same is true of every other state.




...taxation generally...





Our federation is in difficulties. Successive federal governments have taken an increasing proportion of the taxation revenues of the nation. A federal mining tax would be  another example of this trend.

As a result, Australia is the most fiscally centralised of all the OECD federations. 

The States and territories raise only 19 per cent of taxes but are responsible for 40 per cent of public spending.


..essential principle...


( Continued  below)



Read more...
 
Federal mining tax: a long way to go Print E-mail
Written by ACM   
Saturday, 09 April 2011

Notwithstanding the government agreeing to the broad ranging changes recommended by a committee headed by Don Argus, formally from the BHP Billiton company, it is unlikely that the miners not involved in the negotiations – that was most of them - will agree, reported Scott Murdoch in Hong Kong for The Australian (24/3)

Nor is Western Australia and possibly Queensland likely to accept that they cannot increase royalties, or that the commonwealht may punish them if they do.

The mining  tax raises important constitutional and legal issues touching upon the federal nature of our Commonwealth which we have discussed in these columns. Noe of these seem to have been resolved, apart froma grudging acceptance by the Commonwealth that they have agreed with the three miners that state royalties are deductible.


Read more...
 
Presentation on A Federal Mining Tax Print E-mail
Written by ACM   
Thursday, 17 March 2011

This is an  ACM presentation on the two proposals since 2010 for a Federal  mining tax.

Until recently the taxation of minerals and petroleum found within the territory of a State has been a matter for the State.

Land grants within the State normally reserved minerals to the Crown. But this is to the Crown in the right of the State, not the Commonwealth.

In 2010 the Rudd government proposed a 40% super profits tax on mines and petroleum found within the territory of the States. The miners said this would lead to a total effective tax rate of 55% which would make Australia uncompetitive.

When the Rudd government fell, the new Prime Minister Julia Gillard and Treasurer Swan negotiated an agreement with the three largest foreign miners for a substitute tax, the MRRT.

This will lead to a lower effective tax rate for the three foreign miners than that payable by the others including the Australian miners.

In addition the offshore PRRT will be extended to petroleum resources found within the territory of the States.

Both taxes raise important constitutional and federalism issues which are discussed in this presentation .

This part, Part I, serves as an introduction.  Parts II and III  are below.

Read more...
 
The federal balance must be maintained Print E-mail
Written by Professor David Flint AM   
Saturday, 29 January 2011
We have on several occasions back to April 2010 expressed our concern about federal government proposals to tax minerals found within the territory of the states. (See links below) 

This issue is crucial to any consideration of federal-state relations within the Australian constitutional system. ACM is committed to the defence of that system.

The Commonwealth is already flush with revenue. It controls vast taxation streams, so many that Australia has become the most fiscally centralised federation within the OECD.

The taxation by the federal government of mineral and petroleum resources belonging to the states will only make that bad situation worse.

Our Federal Commonwealth will be even more unbalanced. This, of course, was never the intention of our Founding Fathers. The people have never approved such a deviation from the fundamental original intention of our Constitution.

Image
[Sir Samuel Griffith and colleagues: Samuel Griffith Society ]


 


...federal taxation proposals...





The first version of the tax, the Super Profits Tax, was a crucial element in the overthrow of the former Prime Minister Kevin Rudd and his replacement by his deputy Julia Gillard.

Its successor tax, the minerals rent resource tax (MRRT) was designed in rushed secret negotiations between the Prime Minister, Treasurer and three foreign miners.  They came to an agreement just before the 2010 Federal Election.

But after the election a dispute arose between the government and the three foreign miners as to whether the agreement provided that any increases in state royalties should be allowable as deductions.

The government now seems to accept that the agreement provides that any such increases should be allowable. It is believed that the federal government will attempt to ensure the states do not increase their royalties.  

In addition the government proposes to extend the offshore Petroleum Resource Rent Tax (PRRT) to petroleum and gas found within the territory of the states.



...ownership of the minerals...



[Continued below]
Read more...
 
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