Shortfall 'no surprise' to Fortescue executive
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 on Monday.
Treasury forecast the mining tax would deliver $2 billion to the government by June 30 this year, yet the tax had delivered just $126 million by December 31.
The shortfall appears to be due to lower commodity prices and multi-billion 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 in the tax to ensure it was not acting retrospectively on companies, but the measure looks set to undermine both revenue flows and the credibility of the tax.
Mr Pearce said Fortescue had an "unrecognised tax benefit" of about $3.5 billion, which would help to ensure the company does not pay any mining tax in the "forseeable future".
Frequently Asked Questions about this Article…
Fortescue’s CFO Stephen Pearce told a Senate inquiry the mining tax system is “incredibly” complicated and that it took his company several years to work out what its own shelter from the tax would be. Given that complexity, he said he wasn’t surprised Treasury couldn’t see the size of deductions miners would claim.
Treasury had forecast the mining tax would deliver $2 billion to government revenue by June 30, but by December 31 the tax had delivered only $126 million, a very large shortfall compared with the original estimate.
The article says the shortfall appears to be due to lower commodity prices and multi‑billion‑dollar deductions miners are claiming for money spent building mines before the tax was implemented.
The right to claim a deferred tax asset was included so the tax wouldn’t act retrospectively on companies. But allowing miners to claim those pre‑tax spending deductions looks set to reduce revenue flows and has undermined the credibility of the tax, according to the article.
Fortescue’s CFO said the company had an “unrecognised tax benefit” of about $3.5 billion. That benefit will help ensure Fortescue does not pay any mining tax in the ‘foreseeable future,’ as described in the article.
Yes. Treasury secretary Martin Parkinson admitted that his inability to see the size of the deductions being claimed by big miners was the reason for Treasury’s wildly inaccurate forecasts of the tax’s revenue.
According to the article, the large shortfall has the potential to undermine government revenue flows and the credibility of the mining tax, because the deductions and lower commodity prices have substantially reduced expected receipts.
The article suggests investors should be aware that the mining tax’s complexity, significant pre‑implementation deductions (deferred tax assets) and commodity price moves can materially affect expected government revenue and a miner’s tax position. For example, Fortescue’s reported $3.5 billion unrecognised tax benefit means it may not pay the tax for the foreseeable future.
Call 1300 880 160
Start a chat
Schedule a call
