Prices set to boost mines tax
While almost certain to fall short of the $2 billion in receipts forecast by Treasury for this financial year, the three commodities captured under the tax have been fetching higher prices in the past three months than during the December and September quarters.
The tax operates under a complicated system that is difficult to predict, but higher prices for iron ore, coking coal and thermal coal are the best indicators the tax will bring in more than the $126 million raised in its first six months.
The average iron ore price in the past three months was slightly more than $US148 a tonne - a 23 per cent improvement on the $US120 a tonne averaged in the December quarter.
The amount of iron ore sold in the March quarter was hampered by cyclone interruptions in the Pilbara, but these lost sales will be partially offset by the expansion programs in which companies such as BHP Billiton constantly increase their volumes of iron ore exports.
Coking coal prices improved more modestly, with the average price for the March period being 7 per cent better than during the December quarter.
Data compiled by the McCloskey Group suggests the benchmark thermal coal product exported from Newcastle fetched an average price of $US91.62 in the March quarter - 9 per cent better than the December quarter.
Treasury and Australian Tax Office officials will appear before a Senate inquiry into the tax on Wednesday, where the gap between forecast revenues and receipts will be investigated.
Some experts have been warning since August 2012 that mining companies would use their deferred tax credits to reduce the amount they pay, yet no action was taken to close the loophole.
In March, Rio Tinto estimated its deferred tax credit stood at $1.2 billion, while it also reported a further $12.6 billion worth of possible tax credits that were not yet formalised.
Frequently Asked Questions about this Article…
The article says the mining tax should bring improved revenue flows as big miners submit their March-quarter receipts, but it's still almost certain to fall short of Treasury's $2 billion forecast for the financial year. The tax raised about $126 million in its first six months.
The tax applies to three commodities: iron ore, coking coal and thermal coal. Higher prices for these commodities increase the tax base, so rising iron ore, coking coal and thermal coal prices are the best indicators that the tax will generate more revenue for the government.
According to the article, the average iron ore price in the past three months was slightly more than US$148 a tonne, a 23% improvement on the US$120 a tonne averaged in the December quarter. While cyclone interruptions in the Pilbara reduced some March-quarter sales, volume increases from expansion programs by companies such as BHP Billiton should help offset lost sales and support higher tax receipts.
Coking coal prices improved modestly, about 7% better in the March period than in the December quarter. Data compiled by the McCloskey Group shows the benchmark thermal coal exported from Newcastle averaged US$91.62 in the March quarter, about 9% higher than the December quarter.
The article notes experts have warned since August 2012 that mining companies could use deferred tax credits to reduce what they pay under the mining tax, and no action was taken to close that loophole. Rio Tinto estimated in March that its deferred tax credit was about $1.2 billion, with a further $12.6 billion of possible tax credits not yet formalised.
The article specifically mentions BHP Billiton as a company expanding iron ore export volumes that can help offset lost sales, and Rio Tinto for reporting significant deferred tax credits that could affect how much tax it pays.
Yes. Treasury and Australian Taxation Office officials are scheduled to appear before a Senate inquiry to investigate the gap between forecast revenues and actual receipts from the mining tax, according to the article.
Everyday investors should monitor March-quarter receipts and upcoming commodity price trends for iron ore, coking coal and thermal coal, company reports on export volumes (for example from BHP Billiton and Rio Tinto) and developments from the Senate inquiry into the revenue shortfall and deferred tax credit issues.
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