Wednesday, August 07, 2013

High court supports mining tax

Miner Andrew Forrest has lost his High Court challenge to the Minerals Resource Rent Tax.  The tax applies to profits for coal and iron ore projects above $75 million.

Mr Forrest and his Fortescue Metals Group had argued that the tax discriminated between states and interfered with the rights of states to control their own mineral resources.

He was supported in his challenge by the Queensland and Western Australian governments.

The court unanimously rejected the challenge, saying the act does not discriminate between the states or give preference to one state over another, and ordered Mr Forrest to pay costs.

Federal Treasurer Chris Bowen welcomed the decision and reaffirmed the Government's commitment to the tax.

"It makes a necessary and reasonable contribution to our tax base in Australia," he said.

"I understand it was controversial when it was brought in and it will go up and down from time to time, but now that it's in we wouldn't change it."

However, the tax's future is uncertain despite the ruling, with the Coalition pledging to scrap it if it wins the election next month.

Mr Forrest and his companies told the High Court that the tax was unconstitutional because it discriminated between the states that use royalty levels to attract investment.

Under the tax, companies pay 22.5 per cent on profits above $75 million from iron ore and coal production but can deduct state royalties from that.

The mining tax raised only $126 million in its first six months and the Federal Government's latest economic statement has revealed that revenue forecasts for the tax continue to fall.

When announcing the revenue figure in February, then treasurer Wayne Swan blamed slumping commodity prices, however generous asset deductions have helped offset the cost to miners.

The 2012 financial reports of BHP Billiton and Rio Tinto showed tax credits worth $644 million and more than $1.1 billion respectively.

Hancock Prospecting's 2012 financial report shows it has an even bigger credit against the mining tax worth $1.16 billion.

WA Premier Colin Barnett says he is not surprised by the High Court's decision and says he would have liked to see the tax overturned.

"The State Government wasn't formally a part of the case but we did in a sense intervene," he said.

"We did so to reassert the state's ownership of the minerals. We didn't want the issue of the MRRT to cast doubt over who owned the minerals."

Fat Prophets resources analyst David Lennox says those credits can be used to directly reduce miners' tax liabilities now and into the future, until they run out.

"Exactly as we saw with BHP, Rio and Fortescue, they [Hancock] actually booked a credit for the minerals resource rent tax for 2012 of $1.2 billion," he said.

Fortescue's estimated tax asset brings the total mining tax credits of the big four iron-ore producers to almost $6.4 billion.

Jeffrey Knapp, a University of New South Wales accounting lecturer, observed that: "Over future periods they're entitled to deductions because the values of their assets for tax purposes are deemed to be higher than the book value they use for their assets in their financial statements."


Kevin Rudd rules out changes to GST as Hockey denies report he is considering tax hike

But can you believe the broken promise party?

Prime Minister Kevin Rudd has vowed there will never be a GST increase under his government, and attacked the Coalition for "clearly" having a hike on its agenda.

According to a report in the Australian Financial Review, Opposition treasury spokesman Joe Hockey said examining the GST is "part of the equation" to simplify the tax system.

He says his comments have been misrepresented, but Mr Rudd says the report shows the Coalition plans to not only increase the GST, but also widen it to cover food.

Mr Rudd pointed to the paper while on the campaign trail in western Sydney this morning, labelling it a "big, big development in the election campaign".

"You've had one Liberal premier after another saying the Goods and Services Tax has to be increased, and now you have Mr Hockey ... saying that it is part of the equation," Mr Rudd told reporters.

"This is a massive issue for Australian families across the country.

"If you're going to jack up the Goods and Services Tax, you've got to be upfront with people about how much, and what it's going to cost them.

"If you're going to have a debate about cost of living pressures, a Goods and Services Tax on practically everything that families buy is the most fundamental thing of all."

The Prime Minister added: "The Australian Government that I lead will not increase the GST, nor will it expand its scope."

Moments after Mr Rudd wrapped up, Mr Hockey took to Twitter to refute the claims.

Opposition Leader Tony Abbott has previously said a Coalition government would release a white paper into Australia's tax system, which could include a review of the GST.

He addressed the GST issue while confirming a pledge to cut the company tax rate by 1.5 per cent from July 2015.

"If it comes up in the consultations, we will consider what they come up with, but the fact is we have no plans whatsoever to make any changes to the GST," he said.

"I also point out that you can't change the GST in any significant way without the consent of state governments, including a Labor state government."

He was flanked by Mr Hockey, who added the Financial Review was "dead set wrong".

"Basically one paper beat it up and they got it wrong. What we have said emphatically is any change in relation to the GST or major taxation change will go to the people," he said.

Mr Hockey's assistant treasurer, Mathias Cormann, had earlier told the ABC a Coalition government would "have a conversation with the Australian people about the need for tax reform over the medium and long-term".

"Our focus will be on lower, simpler, more efficient taxes," he said.

The Coalition's company tax cut - a campaign sweetener for business will cost the budget $5 billion over the forward estimates - could be the single biggest single spending commitment of the campaign.

The Coalition says the plan has been costed but is yet to spell out the costing details.

The Government has seized on that as proof the policy can only be funded through harsh spending cuts or a GST hike.


Papua New Guinea to create new visa class for resettled refugees

Papua New Guinea's foreign minister says his government intends to pass legislation setting up a new visa class so refugees can live in the country.

Both PNG and Nauru have recently signed agreements with the Federal Government, which will see refugees who come by boat to Australia resettled in the Pacific nations.

The Opposition has ridiculed the Nauru deal because it has emerged the island nation does not have a permanent residency visa class.

Furthermore, the MP representing Manus Island, Ronnie Knight, last month predicted no refugees would be resettled in PNG because of its strict citizenship rules.

But PNG's foreign minister, Rimbink Pato, says the deal his country has struck will involve legislation ensuring refugees can live there.

"Once they are determined under PNG law that they are genuine refugees then there will be legislation passed, which will ensure that they are recognised or they're given a different class of visa under our law," he said.

"So I can say to you that the process and the terms are well and truly working."

The PNG government has signed the Memorandum of Understanding with Australia formalising the deal to send all asylum seekers to Manus Island.

Australian Immigration Minister Tony Burke was in Port Moresby to witness Mr Pato sign the document late yesterday afternoon.

Mr Burke says there can be no doubt about the desire of both country's to tackle people smuggling.


Government may sack bureaucrats named in $1b Qld Health payroll bungle

Fire a bungling bureaucrat?  Unheard of!

The State Government is considering sacking bureaucrats who were named and shamed by the Commission of Inquiry into the Queensland Health payroll debacle.

The payroll failure has cost taxpayers more than $1 billion.

The inquiry found the former Labor government settled with IBM when it could have recovered more money through legal action, but did not criticise the decision.

It found the health payroll debacle was partly the fault of public servants, who failed to manage the project properly.

The inquiry says department directors-general capitulated when negotiating with IBM, with the State Government making a timid and ineffectual response to the payroll failure.

Some of the public servants are still employed by the Queensland Government.

The ABC understands the State Government will put forward a motion in Parliament tomorrow on taking 'strong action' against those named in the inquiry's findings, which could include sackings.

The inquiry found the Queensland Government cannot recover any money from IT company IBM for the failure of the payroll system and it will face no legal action.

However, Parliament is likely to debate a motion to stop awarding contracts to the IT company unless it proves it has acted to prevent similar problems in future.

Meanwhile, IBM has disputed some of the findings of the inquiry.

The company says as the prime contractor for the upgrade, it bears some responsibility.

But it says most of the blame belongs to bureaucrats who did not tell the company what they need or fix the scope of the project.

The former Labor Government surrendered its ability to sue IBM for breach of contract when it settled with the company after the failure.


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