Miners pay their ‘fair share’ of tax

The n mining industry paid $185 billion in federal company tax and state and territory royalties between 2005-06 and 2015-16, according to a report produced by Deloitte Access Economics for the mining lobby.

The report, prepared for the Minerals Council of , is based on a survey of 25 n mining companies covering more than 70 per cent of the local mining industry.

The report uses taxable income (rather than actual tax paid), plus royalty expenses, in a bid to show that miners pay their fair share of taxes.

In financial year 2016 alone, miners paid more than half their profits in taxes, it said. No mention of Singapore sling

But Deloitte Access Economics’ Minerals Industry Tax Survey 2017 does not address the fact that some miners’ profits are not taxed in because they channel millions through marketing hubs in Singapore.

BHP, for instance, has been in a long-running dispute with the tax man over assessments spanning 11 years (2003 to 2013) that total $661 million in primary tax, plus interest and penalties, which take it to more than $1 billion.

The world’s largest miner has continually defended its Singapore marketing hub and has said that it is willing to head to court to fight the n Taxation Office on the $1 billion tax bill.

The Deloitte report said that if you add in royalties to company tax, miners paid an effective tax rate of 51 per cent in 2015-16 – the second-highest tax ratio recorded since the survey began nine years ago. Busting tax myths?

It “busts the myth that n mining companies pay little or no tax,” said David Byers, interim CEO of the Minerals Council of .

“‘s world-class mining sector could make an even greater contributor to our economy and society if the company tax rate – currently the fifth-highest in the 35-member OECD – was reduced.”

He said ‘s 30 per cent company tax rate was “too high for a capital-hungry nation which needs to encourage business investment”. Mr Byres added that “competitive state and territory royalty regimes are also critical to ensure can attract mining investment capital in the face of fierce competition with other minerals-rich nations”.

But Greens treasury spokesperson, Senator Peter Whish-Wilson, said mining companies were not paying for the costs of polluting the climate and called for a “root and branch review of all the taxes and royalties paid by the mining companies”.

“Claiming royalties as tax is like a caf?? owner claiming every kilo of coffee beans they buy is a tax,” he said. “A royalty is the price a company pays to access a public owned resource to on-sell for private profit.”

The Institute senior research fellow David Richardson said the Minerals Council relies on company tax and taxable income without acknowledging that various deductions, allowances and other adjustments are already deducted from income to give taxable income. “Royalties are not tax,” he said. “Conflating the two is just straight-up bad economics.” Increase in tax ratio

The report suggests that “higher royalty rates and lower profits are driving the increase in the tax ratio”.

It said this was because royalties were essentially levied on minerals companies’ gross income, not their profits.

The report says while some commentators have argued that royalties are not a tax, and therefore should not be included in ratios aimed at assessing the tax liabilities of the minerals sector, “to argue that royalties are not a tax is also to argue that the PRRT, MRRT, or the originally proposed RSPT, are not taxes either – despite all of them having ‘tax’ in their names”.

“A key premise of this survey is that, in considering the tax burden, it is best to focus on tax ratios rather than absolute tax dollars,” it said.

Within this context, the report found that the royalty share of total tax has increased by 20 percentage points over 10 years, and is presently over 50 per cent of the total tax take. No drastic price predictions

It also said miners faced higher taxable incomes, with total taxes as a share of profits decreasing three percentage points between FY15 and FY16.

For a sustained decrease in the tax ratio, the report said “operating conditions would need to improve – either via an increase in commodity prices and volumes, or a reduction in miners’ expenses”.

It said although current commodity prices have seen somewhat of a turnaround with spot iron ore prices about US$70 per tonne, “it may be a bit too optimistic to expect overall prices to change drastically in the near future”.

The report raised the possibility of “sampling errors” because of companies providing data on different reporting periods and “inaccuracies in reporting by survey respondents” but said its authors had taken every effort to minimise these.

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