Mining tax: $1.7b credit for Rio, BHP
Fortescue chairman Andrew Forrest. Photo: Glenn Hunt
Mining companies Rio Tinto and BHP Billiton have built up a $1.7 billion arsenal of tax credits - and do not have to pay any mining tax until they are used up.
And with Prime Minister Julia Gillard facing a perfect storm over the mining tax, crossbencher Andrew Wilkie heavily criticised her role in the watered-down redesign of the tax - while Kevin Rudd also chimed in with a veiled swipe.
Heaping on further pressure was billionaire Andrew Forrest, who confirmed to Fairfax Media that his iron ore company, Fortescue Metals, would not be liable for any tax under the minerals resource rent tax this year.
This comes as the mining industry ramped up its campaign against Labor - should it decide to toughen up the mining tax.
The Minerals Council of Australia took out full page advertisements in The Australian Financial Review and The Australian newspapers on Wednesday, arguing that the mining industry ''pays its fair share of tax'', given that the mining tax is on top of company tax and royalties.
''The new Minerals Resource Rent Tax must be kept in perspective . . . Enough is enough in relation to the obsession with increasing taxes on mining in Australia.''
Mr Forrest, who had challenged Treasurer Wayne Swan's claim that the tax would still raise billions in revenue for the government after it was renegotiated with Rio, BHP and Xstrata, appears to have been vindicated with the Treasurer's admission that the tax had netted a paltry $126 million for government coffers this year.
''The record stands for itself,'' Mr Forrest said.
Mr Wilkie told Fairfax Media that he had been wrong to believe Treasury predictions of company liabilities under the renegotiated tax instead of the alternative arguments put forward at the time by Mr Forrest.
Mr Forrest had complained that the compromise to allow miners to write off the long-term value of assets from their mining tax liabilities had allowed the big three miners off the hook.
''It is beyond argument that the government was wrong, is wrong, and Andrew Forrest is right,'' he said.
While much focus has been on the dramatic shortfall in mining tax receipts compared with original Treasury projections, the most recent financial accounts of Rio Tinto and BHP Billiton crucially show the two miners have built up $1.1 billion and $637 million in tax credits respectively due to the MRRT.
The credits can be carried forward to offset future mining tax liabilities, casting doubt over when the government can expect to reap a substantial return on the tax, particularly if commodity prices take another turn for the worse.
The credits have accumulated due to the so-called ''starting base allowances'' on existing mining projects that were brought into the mining tax, in order to make up for the historical investment in those mines.
Tax specialists say the allowances are overly generous but that the government was also unlucky with its timing. The market value on mining projects for the purposes of the tax were determined when commodity prices were near their peak.
Rio Tinto is expected to report underlying earnings of more than $9 billion on Thursday.
Mr Rudd's comments on the underperforming tax linked its meagre return in its first six months with his replacement by Ms Gillard.
His intervention came via several media appearances as Ms Gillard and Mr Swan struggled to explain why they had committed billions in new spending on superannuation and business tax breaks funded by the tax, which has not delivered.
When asked in a Sky News interview if the new Labor leadership team had given away too much to the miners, Mr Rudd replied: ''History will be the judge of that.''
He said Ms Gillard had made ''significant changes to the structure of the tax''.
Asked about the tax in a radio interview on Wednesday morning, Mr Rudd conceded that the tax was only in its first six months of operation. ''There's a long ways to go yet,'' he told Adelaide's FiveAA radio. ''Taxation policy is a complex business.''
The former prime minister, who was in Adelaide for a national apology breakfast, said that he would not ''provide a public lecture'' to Ms Gillard and Mr Swan about how they should do their jobs on the mining tax.
''Let's evaluate this once all the data is in.''
With the entire crossbench now backing a reconsideration, Mr Rudd stopped short of prescribing a fix but left no doubt about his views, ''given the fact that it has not collected any real revenue of any significance''.
Friction from crossbench and Labor MPs has increased fears within the opposition that Labor could make a late leadership manoeuvre. Liberals say a sudden switch back to Mr Rudd would ''reset the politics'' in this election year, putting new pressure on Tony Abbott's leadership.
with Judith Ireland