PERTH (miningweekly.com) – Australian minerals industry bodies have called on federal Treasurer Wayne Swan to carefully consider the proposed introduction of new taxes on foreign investment and exploration spend in the mining industry.

The industry bodies were responding to reports that current business tax breaks would be changed, along with the deductibility of exploration expenses.

Queensland Resources Council (QRC) CEO Michael Roche noted over the weekend that, despite the attraction of populist tax grabs with a budget in deficit, he was hopeful that Swan would stay focused on the long-term benefits of continuing investment in wealth-creating industries.

"The whole Queensland resources sector is concerned about rumoured changes to the deductibility of exploration expenses,” he said.

“It is the research and development department of mining and resources from where the next generation of wealth-producing operations begin.”

Roche said that, last financial year, the resources sector invested a record A$36-billion in Queensland through wages, goods and services and community development programmes.

“As reward for this effort, the state government increased coal royalties and now the federal government is threatening to tighten the screws some more, adding to the four new taxes introduced since 2007.

“The bottom line is that every step Australia takes towards making itself uglier as an investment destination, the easier it is for our competitors to look attractive.”

The Minerals Council of Australia (MCA) said at the end of last week that the new legislation would be “vigorously opposed” by the industry body.

“If the government proceeds with plans for two new taxes on foreign investment and exploration, it will have introduced four new taxes on mining since 2007. It needs to get a new trick,” MCA CEO Mitchell Hooke said.

“The government should be focusing on boosting economic growth through policies that cut costs, improve productivity and reduce sovereign risk. Instead, they are headed in the opposite direction.”

Hooke said the proposed tax changes demonstrated that Australia’s policy makers were refusing to do the hard yards of reform and were, instead, falling back on the lazy and counterproductive option of increasing business taxes to fund ever-increasing spending.

“The minerals industry already pays more than A$20-billion in taxes and royalties a year net of the carbon tax and the minerals resource rent tax (MRRT).

The industry’s effective tax rate has remained high and relatively stable, averaging 41.6% since 2001/2. Even net of state royalties, the average effective company tax rate for mining is above the average for all industries.”

Hooke said that altering the thin capitalisation and exploration deduction provisions were a “naked tax grab”.

“They are not concessions or loopholes. They are critical features of the business tax system.”

The industry bodies’ outrage over the proposed new taxes came amid news of a report from the independent Parliamentary Budget Office, which calculated that the MRRT would add just A$800-million in revenue in the current financial year. This was less than half the amount predicted by the federal government.

The Parliamentary Budget Office predicted that between now and 2016/17, the MRRT would raise just A$7.2-billion, nearly A$5-billion less than government expectations.

Swan has refused to comment on the new figures ahead of the publication of the National Budget on May 14.