State royalties to cost more than mining tax - report

INCREASES in royalties charged by conservative state governments will cost many mining companies more in the short term than the minerals resource rent tax, the industry's peak body says.

The prediction raises serious questions, both for the federal government's budget estimates and the opposition's argument that Labor's new taxes are to blame for mining's waning international competitiveness.

The Coalition's spokesman on resources, Ian Macfarlane, said a new analysis for the Minerals Council of Australia by Port Jackson Partners, which found that rising costs and falling productivity meant that miners were becoming relatively less competitive, showed the government was treating the industry like a ''cash cow''.

However, the council's chief executive, Mitch Hooke, said that in today's market conditions the $3.3 billion in royalty rises announced this year by the Queensland, NSW and West Australian governments would, over the next four years, cost miners more than the mining tax, which is supposed to raise $13.4 billion in the same period.

State governments had thought that their royalty increases would effectively be paid not by mining companies but by the federal government, which had promised to reimburse miners for the royalty rises that were announced after the mining tax came into effect. With commodity prices falling, many miners think they will not have to pay a federal profits-based tax, meaning the government will not have to reimburse anything because there is no liability to be rebated against.

''In the current market circumstances, the royalty increases are going to be a far bigger impost,'' Mr Hooke said. ''You don't have to be a rocket scientist to figure out that as prices come off, the [mining tax] is going to be very slim pickings, which means there will be no opportunity to rebate the royalty increases.''

Mining companies were incensed when the Queensland government announced coal royalty rises of about $1.6 billion in the next four years, on top of NSW government royalty increases worth $1.5 billion and a West Australian increase of $800 million.

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