The Chamber of Minerals and Energy of Western Australia chief executive Reg Howard-Smith said any knee-jerk reactions targeting the resources sector in an effort to plug a budget gap would hurt in the long run.
“Any tax law amendments that bring about further costs to the resources sector, which is already dealing with significant increases in the cost of doing business, need to be shelved,” he said.
Speculation in recent weeks has centred on changes to a number of taxes, including exploration deductions and diesel fuel rebates, which Association of Mining and Exploration Companies chief executive Simon Bennison said would reduce Australia’s international competitiveness.
“Noting that diesel can contribute up to 25% of the costs of a typical mining project, any further reduction in the current credit arrangements would be disastrous,” he said.
“The diesel fuel tax credit should be reinstated to pre-carbon tax levels, and not reduced any further.”
Bennison noted that mining projects, particularly those in exploration stages, are having problems raising capital, making it even more critical for the federal government to look elsewhere for a budget solution.
“Now is not the time to introduce policy change that further discourages investment flowing to Australia and continues to make the industry internationally uncompetitive,” he said.
Earlier this month, Minerals Council of Australia chief executive Mitchell Hooke said the minerals industry already paid more than $A20 billion in taxes and royalties each year, net of the carbon tax and Minerals Resource Rent Tax, with an effective tax rate average of 41.6% since 2001-02.
“The government should be spending that significant revenue better, not continually asking for more,” he said.
“Altering the thin capitalisation and exploration deduction provisions are a naked tax grab. They are not concessions or loopholes. They are critical features of the business tax system.”
The groups agree that as one of the largest drivers of economic growth in the country, the government should not do anything to endanger the stability of the mining and resources industry.
“To impose additional taxation burdens on an industry that is the main driver of economic growth in Australia is not smart,” Howard-Smith said.
“Ill-conceived changes in tax policy, without sound economic planning, will risk imposing significant damage to an industry which relies on long-term expenditure planning.”
Bennison said if the government wanted to plan for the future, it should look to bolster exploration.
“The government should focus on growing the mining industry through the exploration sector,” he said.
“The emphasis should be for new discoveries to create employment and revenue for the future.”
Oil and gas industry group APPEA also commented on the budget earlier in May, arguing that every Australian had a stake in the sector’s continued success, but that the turmoil surrounding the budget had negatively impacted investment.
“Australia’s reputation as a place where investors can safely make long-term decisions should not be further eroded at the very time when new investment and new revenue sources are needed,” it said.
