MINERALS RESOURCE RENT TAX: SUBMISSION ON PRELIMINARY EXPOSURE DRAFT LEGISLATION AND EXPLANATORY MEM

This Submission is made by the Minerals Council of Australia (MCA) in conjunction with the Chamber of Minerals and Energy of Western Australia, the Queensland Resources Council, the New South Wales Minerals Council, the South Australian Chamber of Mines and Energy, the Victorian Division of the MCA, the Tasmanian Minerals Council and the Northern Territory Division of the MCA. It responds to the release for public comment on 10 June 2011 of preliminary exposure draft (ED) legislation for the introduction of the Minerals Resource Rent Tax (MRRT). This Submission does not restrict the scope for any of the aforementioned organisations to make further submissions on matters specific to the interests of their respective memberships.

On 24 March 2011, the Australian Government announced its decision to accept all recommendations of the Policy Transition Group (PTG) established to advise the Australian Government on implementation and transition issues related to resource taxation reforms. This Submission recognises that the ED legislation and accompanying Explanatory Material (EM) is based on the recommendations of the PTG and that these recommendations provide a solid foundation for the implementation of the MRRT. There is no desire on the part of our organisations to compromise the overall package of recommendations, including the fiscal considerations that underpin it.

It is also the case, however, that a genuine consultation process must allow for consideration of areas where the PTG recommendations are either incomplete or have been interpreted in the ED legislation in a form that does not achieve the policy intent in the most efficient and effective manner. In its December 2010 report to the Australian Government, the PTG itself noted that many of its proposals would “require further elaboration in the course of developing legislation and administrative procedures”. It expressly drew attention to the fact that:

  • due to limited time, a range of administrative and implementation issues raised in the earlier consultation and submission process had not been addressed in the December report;
  • these (mostly technical) issues will be more relevant to subsequent stages of the implementation process; and
  • in translating PTG recommendations into legislation, it was expected that further issues will arise that will require resolution.

In this context, the PTG recommended the establishment of a Resource Tax Implementation Group (RTIG) to support the legislative drafting stage of resource taxation reforms. Comprising representatives of industry and the tax profession as well as government officials, the RTIG has made an important contribution in the legislative drafting stage and it will continue to have a key role to play in coming months. Equally, the public consultation process is critical to ensuring the legislative design of the MRRT accords with good tax policy and does not increase the compliance burden of the MRRT beyond what is required in implementing the policy intent.

The recommendations of this Submission are designed to ensure that the PTG recommendations are translated into legislation in a way that:

  • provides appropriate certainty and clarity to miners;
  • minimises administrative complexities and unnecessary compliance burdens on industry and is consistent, as much as possible, with existing commercial practices; and
  • limits the potential for future disputes over the interpretation and administration of the tax.

The recommendations of this Submission are summarised in Appendix Two and include drafting recommendations.

There are a number of cases where achieving these objectives requires amendments to the ED legislation to ensure it more rigorously and closely follows the PTG recommendations. In other instances, there is a need for further technical consideration of certain PTG recommendations and how they can be best translated into legislation in a form that mirrors the policy intent but also takes account of existing commercial practices and the need to minimise administrative complexities and compliance burdens. In this context, the Treasurer’s press release of 10 June 2011 noted some technical issues that the Treasury and RTIG will continue to work on and which will be covered in the second exposure draft release. In further cases, there remains a lack of clarity in the ED legislation, either because relevant parts of the legislation have yet to be released or because what is currently in the ED legislation is open to a degree of interpretation that does not aid taxpayer certainty.

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