... believes projects must be environmentally sound and socially responsible. ... is the nation’s second largest export earner. ... spends over $20 billion each year on goods, services and the community in Australia. ... earned $38.6 billion of export revenue in 2012-13. ... is investing in cutting-edge technologies to reduce greenhouse gas emissions from coal mining and use. ... accounts for three quarters of Australia’s grid electricity generation. ... has almost halved its greenhouse gas emissions intensity since 1990. ... employs around 50,000 people directly and more than 135,000 indirectly.

Taxes and royalties


The MCA’s third annual tax survey, conducted with Deloitte Access Economics, was released in October 2013. Covering 22 companies, the survey focuses on company tax and royalties paid by the industry to calculate effective tax rates (company tax and royalties as a share of pre-tax taxable income).

The survey shows that the industry’s overall tax rate has remained high and stable, with a rate of 41% in 2011-12.

Coal

For coal, the 2013 survey found that:

  • the effective tax rate on coal was higher than the industry average at 48.9% in 2011-12
  • coal’s tax rate has been increasing over the last 5 years
  • the higher tax rate is being driven by royalties.

The effective tax rate on coal has increased from 41.5% in 2007-08 to 48.9% in 2011-12. Royalties now account for 27% of taxable income – an increase of almost 11 percentage points since 2007-08.

Chart 1: Coal industry tax rate (company tax and royalties as % of pre-tax taxable income)

Source: Deloitte Access Economics

Lower taxable income and higher royalty collections underpinned the rise in the coal industry tax rate in 2011-12. Taxable income decreased in 2011-12 due to lower profits for some companies and the use of tax losses from previous years to reduce taxable income for others.

This trend of an increasing tax rates on coal can be expected to continue in 2012-13 due to:

  • Queensland’s coal royalty rate increase from 1 October 2012;
  • a fall in coal prices through the course of 2012-13 impacting profits and taxable income; and
  • the carbon tax applying from 1 July 2012.

Deloitte Access Economics was also asked to make industry-wide estimates for coal’s contribution from company tax and royalties since 2006-07. These estimates show that the coal industry contributed a total of $38.1 billion from these two instruments since 2006-07, comprising $17.7 billion in company tax and $20.5 billion in royalties.

Chart 2: Coal royalties and company tax (Total estimates)

Source: Deloitte Access Economics

Between 2006-07 and 2012-13, coal royalty payments rose from $1.4 billion to $3.2 billion at an average annual growth rate of 14%.

Royalties have consistently accounted for a larger share of the tax rate on coal compared with other major mineral commodities. Figure 2 shows that royalty rises have contributed to a sharp increase in the ratio of royalties to company tax paid, from around 0.6 in 2006-07 to an estimated level of almost 1.8 in 2012-13.