High Court threat to mining tax

Date
    November 5, 2012


Andrew Forrest argues the mining tax discriminates between the states.

THE High Court has agreed to hear a landmark challenge to the controversial super profits mining tax, posing a fresh threat to the government's embattled revenue base.     :-?

Chief Justice Robert French ruled on Monday that the court's full bench will hear the case - brought by West Australian mining magnate Andrew Forrest's Fortescue Metals Group - next year.

Starting as early as March, the case sets the scene for a fresh showdown between the Gillard government and the billionaire miner, who launched the action in June.




The mining tax is forecast to raise $9.1 billion over four years, including $2 billion this financial year. But it reportedly produced nothing in the September quarter, and Deloitte Access Economics forecasts it will yield no more than a net $500 million this financial year.


The flaky nature of the mining tax projection is one reason why the $1.1 billion projected surplus for 2012-13 in the recent budget update is being heavily questioned.

Prime Minister Julia Gillard and her ministers are refusing to guarantee the surplus will be met.

When news of the court case came through, shadow treasurer Joe Hockey tweeted ''another nail in the coffin'' of the tax. He said later the tax had had five iterations and would be ''the signature policy failure of the Gillard government''.

Fortescue paid no mining tax in the September quarter and says its liability will be negligible in the early years. It argues that the tax discriminates between states and prevents them from encouraging mining activity.     :(

The two biggest mining states, Western Australia and Queensland, have previously said they would put forward their own arguments in the case without formally joining Mr Forrest's challenge.

The court's decision comes after a series of preliminary hearings that were used to establish key facts that both sides could agree on. A spokesman for Fortescue said: ''We're pleased there's no more delay.''

Treasurer Wayne Swan has previously described the challenge as futile, saying he was confident in the government's legal position. His spokesman said on Monday night the government was confident the minerals resource rent tax was valid.     :)

A leading constitutional law expert, University of New South Wales professor George Williams, said the court had been expected to agree to hear the case because of its significance for federal-state relations.

Relations between Mr Forrest and Mr Swan have been frosty since the Treasurer and Ms Gillard designed the revised tax in secret talks with the big mining companies in 2010.

In April, Mr Forrest accused the Treasurer of trying to fool the public over a last-minute compromise on the mining tax struck between Mr Forrest and former prime minister Kevin Rudd - which Mr Forrest says was later ditched by Labor.

Mr Swan rejected the Deloitte Access Economics claim that the budget was headed for a deficit of more than $4 billion and that the mining tax would bring only $500 million. ''The mid-year review shows that the government's on track to return the budget to surplus,'' he said.

Opposition Leader Tony Abbott recommitted a Coalition government to bringing surpluses in its first three budgets - while insisting the government will not be able to deliver one this financial year.

The opposition also accused the government of misusing the Treasury after its analysis of three Coalition policies found they would cost business $4.57 billion in the first year.

Mr Abbott said the analysis did not take into account the Coalition repealing the carbon and mining taxes and provide a modest company tax cut.

Read more: http://www.theage.com.au/opinion/political-news/high-court-threat-to-mining-tax-20121105-28tw9.html#ixzz2BNlW3k51

Treasurer Wayne Swan has previously described the challenge as futile, saying he was confident in the government's legal position. His spokesman said on Monday night the government was confident the minerals resource rent tax was valid.     :)

wrote on Nov 6^th, 2012 at 6:39am:

Treasurer Wayne Swan has previously described the challenge as futile, saying he was confident in the government's legal position. His spokesman said on Monday night the government was confident the minerals resource rent tax was valid.     :)

Was that what they were saying about the Malaysian solution.

Never ever have I seen a government so stuffed, so incompetent, so dishonest.

i heard the legal arguements for this challenge and whilst i'm not a constitutional lawyer, it seems very likely to get up.

it is unconstitutional to have a federal tax levied at different levels in each state, and as the mining tax varies depending on the state royalties, it would seem an unconstitutional tax.

maybe slater and gordon can represent the commonwealth at taxpayer expense ;) ;)

Another nail in the coffin Joe?

The case hasn't been heard yet.

It seems a bit of a stretch that the way the legislation is written is in breach of s 51(ii) of the constitution, particularly when it's a tax on company profits and has little to do with discriminating against states (if i have read it correctly).

The challenge against the PRRT failed when the states challenged that, i expect this will go a similar way but for different reasons.

aquascoot wrote on Nov 6^th, 2012 at 7:08am:

i heard the legal arguements for this challenge and whilst i'm not a constitutional lawyer, it seems very likely to get up. it is unconstitutional to have a federal tax levied at different levels in each state, and as the mining tax varies depending on the state royalties, it would seem an unconstitutional tax. maybe slater and gordon can represent the commonwealth at taxpayer expense ;) ;)

No, it isn't unconstitutional - it isn't a federal tax levied at different levels in each state.  It is a tax on profits uniform across the states.  Royalties are a state matter.

This is just desperate straw clutching.

Certainly seems that way.

it took them a couple of goes to even give their arguments some clarity so the HC knew what it was they were actually trying to argue.

It's amusing that one of the arguments to be made is that the tax restricts the ability to encourage mining when both QLD and WA have significantly jacked up royalties in recent times.

progressiveslol wrote on Nov 6^th, 2012 at 6:41am:

wrote on Nov 6th, 2012 at 6:39am: Treasurer Wayne Swan has previously described the challenge as futile, saying he was confident in the government's legal position. His spokesman said on Monday night the government was confident the minerals resource rent tax was valid.     :) Was that what they were saying about the Malaysian solution. Never ever have I seen a government so stuffed, so incompetent, so dishonest.

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