Government modelling on new tax questioned by industry

In a statement the group said that analysis of the ATO’s Taxation Statistics 2007-08 shows that the average corporate tax rate paid by the mining sector is 27.81 per cent. When mining company royalty payments are added, the effective tax rate paid by Australia’s mining sector increases to 41.3 per cent.
“Rather than relying on a graduate research paper from South Carolina, the Government could have obtained accurate data from its own Tax Office,” said the Minerals Council’s Ben Mitchell.
The Minerals Council of Australia has released a new advertisement to counter the claims made by the Government.
Meanwhile a group of 20 academics and economists has proffered its opinion on the Resource Super Profits Tax (RSPT), saying that mining companies should pay more than they are now.
The group, including former chairman of the Australian Competition and Consumer Commission Allan Fels, issued a statement that said the debate has been dominated by misinformation. It said that mining is different from other industries in that it uses and depletes natural resources and it needed to be taxed appropriately.
BHP Billiton has expressed disappointment at what it sees as the misrepresentation of the level of taxes it paid on its Australian operations.
Chief financial officer Alex Vanselow said, "At the time the Australian Government announced its proposed new super tax, BHP Billiton clearly stated that in the 2009 financial year it paid total taxes to Australian governments of A$6.3 billion, resulting in an effective tax rate of around 43 per cent."
Vanselow expressed concern that lower tax rate numbers were being attributed to the tax paid by BHP Billiton: "It concerns BHP Billiton that inappropriate conclusions appear to have been drawn from a study by two academics from a United States university. A more accurate and meaningful method is to use the actual tax payments and returns submitted by companies in Australia."
The group stated that it pays three broad levels of taxation on earnings in Australia. They include company tax, paid on the taxable income of the business; royalties, paid on the value and/or volume of resources extracted; and other production taxes, paid on the value of oil and gas resources extracted.
The mining giant has met with the Resource Tax Consultation Panel advising the Australian Government on its proposed super profit tax. BHP Billiton conveyed to the panel that the proposed super tax has been designed in a way that has the unintended effect of slowing investment in Australia and putting the future prosperity and employment prospects of all Australians at risk.
As previously conveyed to the Government, BHP Billiton said any new tax on the minerals resources industry should primarily by prospective in application, and should vary by commodity.
In particular, BHP Billiton urged the Panel to recommend to the Government that the time be taken to properly engage with the industry on all aspects of the tax rather than pursue selective adjustments in order to achieve the objectives of tax reform that benefits Australia.
The Association of Mining and Exploration Companies (AMEC) in Australia described the Government’s economic modelling of the RSPT as “theoretically and fundamentally flawed, as it takes no account of decision making in the real world.”
The group’s Simon Bennison said the Government’s view that the new tax will be positive for the mining industry glosses over key caveats contained in the Econtech Report.
“In fact, KPMG have confirmed this view in their recent publication ‘Reform in Focus’ indicating that the growth forecast assumes that the RSPT is a relatively neutral tax with minimal long run distortions to investment decisions for future projects,” said Bennison.
“It is clear from the overwhelming response of financial commentators and experts, including Moody’s, that this tax will be a massive hit for future investment in the Australian mining industry."

The tables referred to by the Minerals Council of Australia, for tax contributions by industry (Tables 8 and 9) are available at the following link:
http://www.ato.gov.au/corporate/content.asp?doc=/content/00225078.htm&page=10&pc=001/001/009/005&mnu=43433&mfp=001&st=&cy=1