AMEC says it has made a number of detailed submissions to the government, treasury and parliamentary committees explaining the impacts of MRRT and its effect on small emerging companies, which have simply been ignored.
“We are extremely concerned with the decreasing share of investment capital flowing through to mining and exploration projects in Australia and the increasing share of capital investment going offshore,” AMEC national policy manager Graham Short said in a statement.
“Comments by the Treasurer Wayne Swan indicating the MRRT is well designed and has been agreed by the industry are simply incorrect.
“The MRRT is poorly designed, was planned in secret, is unfair and discriminates against small emerging mining companies.
“As it stands this mining tax penalises the small emerging Australian mining companies who are competing against the three large multi nationals [Rio Tinto, BHP Billiton and Xstrata] who negotiated this tax to suit their own circumstances and shareholders.”
He said this has been vindicated by independent research by the University of Western Australia which demonstrates new and emerging producers will pay a higher effective tax rate than large mature miners.
Short said the mining industry was not opposed to paying additional taxes, but wants a fair, equitable and simple tax reform agenda that does not affect domestic and international competitiveness.
Yesterday, Short said Australia’s global share of capital raised for mining projects sunk to 15% from 21% in 2008.
The figures, which were compiled by research group Intierra and AMEC and published in The Australian, showed the value of capital raisings in Australia increased slightly from $A4.3 billion to $4.5 billion between 2008 and 2011.
Yet, for the same period the value of capital raisings jumped strongly in Africa (up 26%), Canada (up 31%), South Africa (up 59%) and the rest of the world, including Europe and Asia (up 78%).
Short said Australia needed to examine its public policy settings, including its environmental approvals system and tax regimes to become more competitive.
Today University of Melbourne economist Professor Max Corden weighed into the debate, arguing in a paper published by the Australian Financial Review the preferred policy option should be contractionary fiscal policy and expansive monetary policy to achieve a lower exchange rate without inflation.
He says running a large fiscal surplus, and possibly establishing a sovereign wealth fund that invests primarily in offshore assets would be the best policy option, but this is not to argue that mining tax rates could be higher.
Corden helped develop the “Dutch Disease” theory of how a high currency creates economic stresses for resource-rich countries like Australia.
In a paper published today by the Melbourne Institute, he says to make an impact on Australia’s Dutch Disease through taxation of the resources sector, a tax on mining would be required “at a level that significantly reduced not just after-tax profits but output of the industry”
He argued that to achieve a significant decline in the exchange rate without “killing the goose” would involve generating a “sufficient fiscal surplus not primarily through taxing the booming sector but through increases in taxes or reduction in government expenditures”
The Dutch Disease concept initially examined the erosion of the Dutch economy under the weight of its North Sea gas boom in the 1960s.
This article first appeared in ILN's sister publication MiningNews.net.
