A successful Australian mining sector means a stronger Australian economy.
A competitive tax system is critical for investment in capital-intensive industries such as mining. Mining projects involve high-risk exploration outlays, large upfront capital commitments, long-life assets, sophisticated technologies and long lead times to profitability.
Competition from other resource-rich economies to capture future opportunities in resource development is intense.
The combination of state and territory royalties with federal company tax means Australia is a relatively high tax jurisdiction for mining.
Australia’s 30 per cent company tax rate is simply too high for a small open economy that is a net importer of capital. Australian businesses need a lower corporate tax rate to increase investment, jobs and wages.
Stable fuel tax arrangements are also vital to mining’s competitiveness.
Fuel tax credits are critical to a diverse range of regional industries reliant on diesel, including mining, agriculture and tourism. Fuel tax credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by business off road or in heavy on-road vehicles.
Energy access is restricted in regional Australia. Generators of off-grid electricity are located from the north east of Queensland to the Pilbara in Western Australia and from Darwin in the Northern Territory to King Island in Tasmania.
Any move to reduce fuel tax credits would introduce a tax distortion by imposing a tax on industries that are reliant on diesel fuel to generate power and operate heavy machinery. It would also create financial hardship for some of Australia’s most remote communities.
Australia also needs competitive and stable exploration and R&D tax arrangements. Exploration is critical to secure a future pipeline of mining investment. Government policy should support Australia’s attractiveness as an exploration destination, and immediate deductibility for exploration expenditure is a long-standing and critical feature of the income tax system to encourage mineral exploration in recognition of the spill-over benefits to the economy.
Australia’s world-class mining sector doubled its contribution to funding for roads, schools, hospitals, police and other essential services on which Australians depend between 2015-16 and 2016-17 through a massive increase in company tax and royalty payments.
Research by Deloitte Access Economics reveals that Australian mining companies paid $12.1 billion in company tax in 2016-17 – almost four times as much as 2015-16, the highest since the mining investment boom in 2011-12 and more than the Australian Government spent on the Pharmaceutical Benefits Scheme.
This means that mining companies are estimated to have paid one in every five dollars of Australia’s company tax take.
Mining companies also paid $11.2 billion in royalties in 2016-17, providing total revenue to Commonwealth and State Governments of $23.3 billion in company tax and royalties in 2016-17 – double the previous year.
In total, mining companies paid $203.6 billion in company tax and royalties in the 12 years between 2005-06 and 2016-17.
The increase in royalties follows a significant investment in new production over recent years, which is delivering a strong dividend to the states from royalties which are based on production.
The increase follows a previous study from Deloitte Access Economics released in January 2018 which showed mining companies paid an effective tax rate of 51 per cent in 2015-16 in company tax and royalties – the second-highest tax ratio recorded since the survey began nine years ago.
Increased payments from mining companies in company tax and royalties provide governments with increased revenue to fund infrastructure and essential public services.
For example, the $23.3 billion paid by mining companies in company tax and royalties in 2016-17 is almost as much as the Australian Government spent on schools and road and rail infrastructure in the same period.
MCA members are committed to enhancing transparency of their activities and relationships with governments and host communities as part of the industry’s commitment to contribute positively to long term social and economic development.
The MCA supports meaningful and globally consistent tax transparency that minimises compliance burdens.
The mining industry has a demonstrated commitment to this principle. A number of mining companies operating globally are subject to multiple tax transparency regimes. In Australia, these include the Voluntary Tax Transparency Code and the implementation of the Extractive Industry Transparency Initiative, both of which the MCA supports.