TESTING the federal government’s flexibility on the final shape of its planned mining tax will be the focus of resources company executives when they meet with the Don Argus-led tax implementation panel in Perth over the next two days.
TESTING the federal government’s flexibility on the final shape of its planned mining tax will be the focus of resources company executives when they meet with the Don Argus-led tax implementation panel in Perth over the next two days.
The planned 30 per cent tax on iron ore and coal profits, and expansion of the current 40 per cent Petroleum Resource Rent Tax on offshore petroleum profits is expected to raise $10.5 billion in its first two years.
But discussions will be limited to the terms outlined in a 130-page issues paper released last week, which effectively rule out fundamental changes such as concessions to cover financing costs or making related infrastructure investment deductible.
Both are seen as critical issues for emerging iron ore miners, who argue the tax unfairly targets them over BHP, Rio Tinto and Xstrata, which helped broker the tax and can access cheaper capital.
Magnetite iron miners will also be hoping to have magnetite effectively exempted because it needs extensive processing before it becomes a saleable product.
At the very least they will seek to have magnetite taxed before such processing occurs.
The first day of meetings will be devoted to coal and iron ore issues, with two group sessions planned for the morning followed by individual meetings with key companies in the afternoon.
At least 15 mostly junior miners and explorers will attend the first session organised by the Association of Mining and Exploration Companies and North West Iron Ore Alliance.
The second session, coordinated by WA’s Chamber of Minerals and Energy, the Magnetite Network and Geraldton Iron Ore Alliance, will involve bigger miners such as Fortescue Metals Group, Grange Resources, Atlas Iron, Gindalbie Metals Aquila Resources, and Citic Pacific.
The second day will largely be devoted to meeting with oil and gas companies, which are generally happy with the PRRT regime for offshore projects.
But many with onshore projects, which are exempt from PRRT and pay only state royalties, are concerned at the extension of the scheme onshore and will raise their fears with the panel.
In particular, those with unconventional shale gas or tight gas projects fear the added tax impost may make their projects unviable.
Consequently, the panel will be asked to consider granting unconventional gas the same tax breaks as ‘frontier’ exploration in deep water, and to classify investment made after production licences have been issued as exploration spending, making it tax deductible.
After the meetings, companies have only until October 28 to make formal submissions to the panel, which hopes to hand its final recommendations to government by year’s end.
