States in lather over mining tax

The federal government's mining tax is "a crude form of control of the states", Andrew Forrest's lawyer told the High Court on Wednesday.

The federal government's mining tax is "a crude form of control of the states", Andrew Forrest's lawyer told the High Court on Wednesday.

David Jackson, QC, appearing for Mr Forrest's Fortescue Metals, told the court the tax's uniform application across the states was unconstitutional because it imposed different tax rates on miners in different states and territories.

This was because the tax was calculated based on how much mining companies paid in royalties, which differed across the country.

"One can't avoid the fact that it is state-based," he said.

States were being unfairly targeted by the government's tax, Mr Jackson said, because it eroded their ability to give assistance to, or reduce the royalties paid by, particular mining companies.

"It interferes with their ability to choose what they want to do with their assets," Mr Jackson said.

The attorneys-general and solicitors-general of Queensland and Western Australia have joined the action, which is being heard in Canberra.

They argue that because mining royalty regimes differed among states before the mining tax began on July 1 last year, the effect of the tax was discriminatory.

Under the constitution, Parliament must not impose taxes in a way that discriminates between states and territories.

"I don't want to sound like I'm selling a soap powder, but one really does have a different rate for a different state," Mr Jackson said.

The minerals resource rent tax applies a 22.5 per cent tax on miners after they have reached $75 million in profit (profit meaning revenue minus expenditure). Mining companies are also eligible for partial profit offsets when they raise between $75 million and $125 million.

The government argues that the mining tax is applied uniformly across Australia, and there is no discrimination between states.

It also argues the tax is imposed only on mining companies, and so cannot interfere with the ability of the states to make their own choices, including how they encourage economic development.

The Commonwealth Solicitor-General, Justin Gleeson, SC, is expected on Thursday to outline the federal government's position, including the argument that any inequalities in the amount of tax paid by mining companies in different states are caused by the royalty regimes of the states, rather than by the Commonwealth's tax.

Mr Forrest launched his challenge against the tax in June.

The hearing will continue on Thursday.

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