PERTH (miningweekly.com) – The Australian resources industry has cautioned the federal government on introducing new taxes ahead of next week’s federal budget.

The Western Australian Chamber of Minerals and Energy (CME) said on Friday that recent speculation regarding changes to exploration deductions, diesel fuel rebates and the thin capitalisation ratio were of concern to the sector.

“A knee-jerk reaction to plug a budget gap by stifling the strongest industry in the country will not achieve the aim of increased revenues in the long run, said CME CEO Reg Howard-Smith.

“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.”

Howard-Smith’s call has been echoed by the Association of Mining and Exploration Companies (Amec), which said any further erosion of the diesel fuel tax credit arrangements provided to the mining sector would be short-sighted and add to Australia’s diminishing 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. The diesel fuel tax credit should be reinstated to pre carbon tax levels, and not reduced any further,” said Amec CEO Simon Bennison.

“The exploration and mining sector is currently facing difficulties in raising capital, as investment continues to flow to projects in other resource-rich jurisdictions.

“We have seen a number of high profile expansion plans and proposed new projects recently put on hold throughout Australia, with the result that contracts have been cancelled and associated staff laid off.”

Bennison said it was critical that the mining or exploration sectors were not targeted as part of the 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.

“There is no doubt that governments are tempted to increase revenue through additional and new taxes, royalties, levies, duties, fees and charges, cost recovery, or by removing existing expenditure deduction allowances.”

Both Amec and the CME pointed out that the government’s Business Tax Working Group had concluded that additional taxes to the mining industry would have a negative impact and advised that the potential business tax reform be shelved.

“To impose additional taxation burdens on an industry that is the main driver of economic growth in Australia is not smart. 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,” said Howard-Smith.