Prices set to boost mines tax
The Gillard government's mining tax should bring improved revenue flows when the big mining companies send in their March-quarter receipts over the next 10 days.
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.
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