In the wake of fresh debate in the senate over fuel tax credits for offroad vehicle use, the Minerals Council of Australia (MCA) claimed the mining industry has already been hit with additional taxes in by the Coalition Government since coming to power.
The changes include the removal of tax deductibles for expenses incurred in exploration, research and development.
According to the MCA, these changes were part of policy proposed by the Labor Government, then adopted by the Coalition Government “without fanfare” according to an MCA spokesperson.
MCA chief executive Brendan Pearson said that since the September election, the Abbott Government had adopted three of the former government’s tax changes that predominantly target the mining sector.
“These changes will increase Commonwealth revenue by $3.7 billion over the forward estimates and come on top of the mining sector’s $20 billion annual tax and royalty payments,” he said.
“The industry’s effective tax rate is currently around 42 per cent and 48 per cent for the coal sector.”
Tax policy changes identified and outlined by the MCA as former Labor Party proposals that were adopted by the Abbott Government include:
Removing mining rights and mining information expenses from the immediate deduction for exploration
· Effective from Budget night 2013-14, expenditure on mining rights and information first used for exploration is no longer immediately tax deductible.
· Expenditure is now deductible over 15 years or its effective life.
· The immediate deductibility of exploration tenements and mining information was legislated by the Howard Government in 2001 as part of a package of measures to simplify capital allowances which included removal of a number of deductions for the resources sector.
Cost: $1.1 billion over four years
Reducing the thin capitalisation safe harbour ratio
· The Government has announced its intention to legislate the previous Government’s 2013 Budget measure to halve the thin capitalisation “safe harbour” ratio from 3:1 to 1.5:1.
· Australia’s current safe harbour ratio of 3:1 was part of a package of reforms implemented by the Howard Government in response to the 1999 Ralph Review of Business Taxation.
· Tightening Australia’s thin capitalisation regime risks the competitiveness of Australia in attracting foreign investment, particularly for capital intensive industries such as mining.
Cost: Component of a $1.5 billion tax package
Restricting access to the R&D Tax Incentive
· The Government has legislation before Parliament to introduce the previous Government’s measure to remove the R&D Tax Incentive for companies with a turnover of more than $20 billion from 1 July 2013.
· Mining (including oil and gas) is a major contributor to investment in research and development (R&D) in Australia comprising 22 per cent of total business R&D expenditure.
Cost: $1.1 billion over the forward estimates
Pearson said that the Greens Party’s attempt to have the fuel tax credit for offroad vehicle use removed, a hit that would come in the May Budget, was based on an ideological crusade to undermine the mining industry.
“It is not grounded in sound economics,” he said.
“Treasury has made clear on numerous occasions that the fuel excise rebate is not a subsidy to the mining industry or the farm, manufacturing or health sectors that also use diesel off road.
“The industry is already more than paying its way, accounting for 8 per cent of Gross Domestic Product but 24 per cent of company tax payments.”
Tax paid on the diesel used in “off-road” situations is currently refunded to companies, a scheme that has been in place for about sixty years for industries such as agriculture, manufacturing, health services, construction, as well as arts and recreation.
The fuel tax credit was reduced by six cents a litre as part of the carbon tax to put a price on the carbon content in diesel, which will be replaced if the carbon tax is repealed.
The Abbott Government has promised to release a new costings report, which will show the removal of fuel tax credits and resulting savings to Treasury, before the budget release on May 13.