Forrest's tax challenge dismissed
In a blow to the resource sector's campaign to have the mining tax scrapped, the High Court has dismissed a challenge led by Andrew "Twiggy" Forrest's Fortescue Metals against its validity.
Although the minerals resource rent tax has raised negligible revenue, its imposition has rankled miners. They argue they already pay royalties to state governments and income tax to the federal government.
Miners are liable to pay the so-called super-profits tax when they generate annual profits of $75 million or more, after taking various deductions into account.
Fortescue argued the tax was invalid for several reasons, including that it cut across state rights in the execution of their functions.
The challenge was dismissed unanimously by the full High Court.
"The treatment of state mining royalties by the MRRT Act ... did not discriminate between states and that the Acts did not give preference to one state over another," the court ruled.
The action argued some portions of the legislation "were not valid laws of the commonwealth".
During the trial, lawyers representing the federal government argued against claims by Fortescue that the mining tax had inhibited the states from developing their resources.
Mr Forrest's lawyers contended the government had punished the states for reducing royalties for individual mining companies by imposing the tax, which is levied across the board.
Afterwards, Fortescue said it was "disappointed" by the High Court ruling, pointing out that the "very low" level of revenue collected by the tax vindicated its opposition to the impost.
"Fortescue challenged the MRRT because it was an unreasonable intrusion into an area of state responsibility and that it was also an unfair, discriminatory and complex tax," Fortescue chief executive Neville Power said.
The tax was "ill-conceived", Fortescue said, saying it was "an unfair and administratively burdensome and inefficient tax".
Opposition Leader Tony Abbott has promised to repeal the tax should the Coalition win the federal election next month.
Treasurer Chris Bowen welcomed the High Court decision and said he had no plans to change the tax if Labor was returned to government.
The structure of the MRRT offsets any reduction in state taxes, so if Western Australia cuts levies in a bid to spur development the federal tax rises and eliminates the difference. That inhibited states from offering tax breaks to companies agreeing to finance development in remote regions, WA argued in a filing to the High Court last year.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free