The mining and finance industry has sounded alarm bells over expanded stamp duty provisions that may reap another massive tax windfall for the State Government while stifling takeovers and investment activity in the Western Australian resources sector.
The mining and finance industry has sounded alarm bells over expanded stamp duty provisions that may reap another massive tax windfall for the State Government while stifling takeovers and investment activity in the Western Australian resources sector.
Under new laws introduced in July, takeovers of listed mining companies in which land or mining tenements represent 60 per cent of company assets are subject to stamp duty at a rate of up to 6 per cent.
At the time of introducing the laws the Government estimated it would make a modest $6.1 million from the new duty. However, new figures from industry show the Government will make almost double this from just one transaction and could potentially reap hundreds of millions of dollars more if the new duty does not chase potential investors away.
Nickel miner LionOre Mining’s $285 million recently agreed takeover of MPI Mines’ WA nickel assets, is estimated to attract between $10 million and $12 million in stamp duty.
Experts in the field suggest the potential takeover of WMC Resources by Swiss miner Xstrata could attract up to $180 million in stamp duty, based on an estimated $3 billion value of WMC’s WA assets.
The mining and finance industries warned against the provision when it was introduced in July as part of a bigger package of business tax reform.
Association of Mining & Exploration Companies chief executive Justin Walawski called on the Government to introduce a moratorium on the new law, given its budget estimates would be exceeded.
He said the nature of the industry meant exploration companies could take their business elsewhere rather than deal with significant transaction costs in a jurisdiction such as WA.
Accounting firm Ernst & Young has completed a review of takeovers in previous years that would have attracted the duty. EY director Celia Searle said the historic data did not support the Government’s $6.1 million estimate.
“They [the Government] are going to end up with a lot more money than previously thought,” she said.
“Following from that if you have a clog on takeover activity then you are going to have ongoing inefficiencies maintained in the market.”
Ms Searle said EY had been involved in two deals that had failed because of the new stamp duty laws.
Deloitte has also warned that it had significant deals fall over because of the duty.
LionOre’s chief financial officer Richard Burton last week told WA Business News the duty was a significant impost to doing corporate transactions for WA assets.
He agreed it could create major problems for WA’s junior mining sector and questioned how rigorously the Government had done its homework, based on the $6.1 million estimate.
“I suspect for the junior producers there would appear to be some risk for them to consolidate and get economies of scale when the nickel price falls,” Mr Burton said.
A spokesman for WA Treasurer Eric Ripper said the changes had been the subject of consultation with the business community prior to introduction and the estimates were made on the best advice of the WA Department of Treasury and Finance.
The spokesman said the Government had not received any evidence of adverse impact on industry since the introduction of the duty.
However, he said any industry organisation could make a submission to the budget review process that would begin soon.
A Department of Treasury and Finance spokesman said there was no data that readily identified the amount of conveyance duty collections that were attributable to land rich assessments, regardless of the rate that applied at the time.
What Governement could have raised?
TAKEOVERS 2000-01 (STAMP DUTY $31m)
Ashton Mining Ltd
Taipan Resources NL
New Hampton Goldfields
TAKEOVERS 2001-02 (STAMP DUTY $220m)
Homestake Mining Pty Ltd*
Pacmin Mining Corporation Ltd
Delta Gold Ltd
Central Norseman Gold
Normandy Mining Ltd
Hill 50 Gold NL
Aurion Gold Ltd
TAKEOVERS 2002-03 (STAMP DUTY $13m)
Magnetic Minerals Ltd
International Goldfields Ltd
Abelle Ltd
Dalrymple Resources NL
*Not included
Source: Ernst & Young
