Fortescue finance head faults tax complexity
Treasury's inability to see crucial aspects of the mining tax process is no surprise, according to a top executive from Fortescue Metals Group.
Speaking at a Senate inquiry into the mining tax, Fortescue's chief financial officer, Stephen Pearce, said it had taken the company several years to work out what its own shelter from the tax would be under the "incredibly" complicated system.
His comments were in response to last week's admission from Treasury secretary Martin Parkinson that his inability to see the size of the deductions being claimed by big miners was the reason for Treasury's wildly inaccurate forecasts over the amount of revenue the tax would deliver.
"I'm not surprised they couldn't see it . . . it has been very hard for us to see it," Mr Pearce said.
Treasury forecast the mining tax would deliver $2 billion to the government by June 30, 2013, yet the tax had only delivered $126 million by December 31.
The shortfall appears to be due to lower commodity prices and multibillion-dollar deductions the miners are claiming for money spent building the mines before the tax was implemented.
The right to claim a "deferred tax asset" was included to ensure the tax was not acting retrospectively on companies, but the measure looks set to undermine revenue flows and the credibility of the tax.
Mr Pearce said Fortescue had an "unrecognised tax benefit" of about $3.5 billion that would help to ensure the company did not pay any mining tax in the "forseeable future".
But Fortescue - one of the loudest critics of the tax - has not emerged unscathed from the implementation of the tax.
Mr Pearce said the company had spent between $3 million and $5 million on preparations to comply with the tax, and would have to continue spending hundreds of thousands a year to merely comply with it.
"Companies are not opposed to change, we are opposed to complexity and compliance costs," he said.