West Australian Premier Colin Barnett says the government decided to lift royalty rates fully aware it could lose in GST revenue, while Treasurer Wayne Swan has conceded he knew of Mr Barnett's plan as early as last year.
Western Australian Premier Colin Barnett says the government decided to lift royalty rates fully aware it could lose in GST revenue, while Treasurer Wayne Swan has conceded he knew of Mr Barnett's plan as early as last year.
Last week, the WA government announced it would lift the royalties on iron ore fines, a crushed form of the mineral, from the current rate of 5.625 per cent to 7.5 per cent by 2014.
The move has angered the federal government, which under the Minerals Resource Rent Tax (MRRT) will have to reimburse mining companies all royalties including increases.
A letter dated May 10, 2010 from WA's Under-Treasurer Timothy Marney to then Treasury secretary Ken Henry has prompted finger pointing from both sides of politics.
The federal opposition's junior treasury spokesman Mathias Cormann said the letter showed federal Treasurer Wayne Swan knew about WA's intention to lift royalties a year ago.
Senator Cormann said Mr Swan was aware of the move while the government was renegotiating the mining tax with BHP Billiton, Rio Tinto and Xstrata and deciding whether to reimburse future royalty hikes.
Mr Swan admitted this afternoon he received the advice around 13 months ago.
Mr Swan sought to turn the tables on the opposition by citing Mr Barnett's admission that it decided to lift royalties even though it might mean a loss of GST revenue
Mr Swan said the premier had been circulating correspondence going back almost 13 months when he did raise the question of royalties.
"But he didn't say he was moving that in that budget then or any subsequent budget," Mr Swan told parliament.
Mr Swan took aim at Mr Barnett saying he was the same WA premier who only last year was claiming mining companies were being taxed too heavily.
Opposition spokesperson for Treasury Joe Hockey asked how the treasurer could reconcile his answer when his chief of staff was given notice of the royalty increase by the premier's chief of staff last Wednesday.
That was two days before Mr Swan told ABC Radio he had not been warned of the decision.
"The only advice that my office received was that they would be in the budget," Mr Swan said.
"We were informed at the last minute that they had taken a decision.
"We were not consulted ... we were not given anytime to consider it, we were not given anytime to respond."
The treasurer also lashed out at Mr Hockey, demanding he stand by earlier statements he made about the mining sector being taxed too heavily.
"Those on that side of the house have egg all over their faces," Mr Swan chided the opposition.
"They have argued in this house that the mining companies pay too much tax, and now that the Western Australian Liberals want to increase their royalties, they say that's just fine and dandy."
Mr Barnett said he was never under any illusion that if the state received more royalty income its share of GST revenue would fall.
"We made the decision on merit alone, there was no consideration in my mind or the treasurer's mind as to what this might mean about relations with Canberra," he told reporters.
"If you look at the events of last few days, it's been Wayne Swan, Julia Gillard and federal ministers that have taken the aggressive approach, not myself, not from the state treasurer."
Mr Barnett attacked WA-based federal frontbenchers Chris Evans and Stephen Smith as "looking like tin soldiers with cop guns" when they held a press conference on Saturday criticising the WA government.
As a result of the royalty rate hike, the premier said some state agreements would have to be renegotiated but did not expect any difficulty.
He said he spoke with BHP chief Marius Kloppers and Rio Tinto's iron ore head Sam Walsh prior to the announcement and neither of them were concerned about the increase.
