Treasury 'unable to know' how miners calculate tax they owe
Speaking at a Senate inquiry into the Gillard government's mining tax, Dr Parkinson said that while his department had a fairly clear view of what was happening to the Australian dollar and commodity markets, Treasury was unable to know how companies were applying their "starting base deduction" when calculating their obligations under the tax.
The starting base is the difference between the book value of a mining company's asset and the market value the miner judges the asset to be worth.
Mining companies such as BHP Billiton and Rio Tinto have been using this as a deduction to their mining tax payments, and must apply it evenly over the life of the mine to a maximum of 25 years.
Dr Parkinson said the size of that "starting base allowance" and the speed at which it was being written off were the crucial details his department could not see, and was likely to be the reason Treasury's revenue predictions have been so wide of the mark with regard to the mining tax.
"It is fair to say we have been sufficiently concerned about our ability to work out what's going on," he said.
"We won't be able to come to grips with what has happened here until we can speak with industry."
But Dr Parkinson said he had not asked the mining companies for clarification of those amounts and would instead wait for them to file their tax returns, which could be three to 12 months away.
He defended that stance by saying it would be abnormal to ask companies for tax information before their submitting their annual tax returns. Iron ore and coal miners have paid $126 million in gross mining tax payments so far, well short of the $2 billion expected by Treasury this financial year.
Tax Office commissioner Stephanie Martin stressed the payments made to date were only estimates by the mining companies, and the Tax Office could impose a penalty if they ultimately judged the companies had underpaid once full-year tax returns are lodged.
Earlier on Wednesday the inquiry was addressed by economist Dr Richard Denniss from Canberra think-tank the Australia Institute. Dr Denniss called for the tax to be widened to include all minerals, particularly gold, copper and uranium.
"We should simplify the tax by broadening it ... There is no reason to have excluded gold and we would be collecting a lot more revenue now if gold was included," he said.
Bill Beament, managing director of gold producer Northern Star Resources, said perceptions that gold companies were still enjoying record high prices for their products were several years out of date. "We are not dealing with record high gold prices at the moment ... keep in mind costs are very high as well; there's not a lot of gold miners who make a lot of money at the moment," he said.
Meanwhile Rio Tinto was refusing to comment on Wednesday on reports it had hired Deutsche Bank to help sell stakes in two of its struggling thermal coal mines: the Clermont and Blair Athol mines in Queensland.
Frequently Asked Questions about this Article…
The starting base deduction is the difference between a mining company's book value for an asset and the market value the company assigns to that asset. Mining companies such as BHP Billiton and Rio Tinto have used that allowance to reduce their mining tax payments. The deduction must be written off evenly over the life of the mine, up to a maximum of 25 years, which directly affects the timing and size of tax obligations.
Treasury says it cannot see two crucial details: the size of companies' starting base allowance and the speed at which they are writing it off. Those factors determine how much tax is reduced and when, so without access to company-specific starting base figures Treasury has been effectively 'blind' to how miners are calculating their mining tax liabilities.
No. Iron ore and coal miners have paid about $126 million in gross mining tax payments so far, which is well short of the roughly $2 billion Treasury expected for the financial year. Treasury attributes some of the difference to its lack of visibility over starting base deductions.
Yes. Tax Office commissioner Stephanie Martin said the payments made to date are company estimates. If the Tax Office ultimately judges that companies underpaid once full-year tax returns are lodged, it could impose penalties.
Treasury secretary Martin Parkinson said he had not asked companies for those figures and preferred to wait for the companies to file their formal tax returns, which could arrive in three to 12 months. He defended that approach by saying it would be abnormal to ask for tax information before annual tax returns are submitted.
Economist Dr Richard Denniss from the Australia Institute called for broadening the mining tax to include all minerals—specifically naming gold, copper and uranium—to simplify the tax and collect more revenue. This was raised during the same Senate inquiry discussed in the article.
Northern Star managing director Bill Beament warned that perceptions of record-high gold prices are out of date. He said costs are very high and that many gold miners are not currently making large profits, suggesting that including gold in the mining tax may not produce the windfall some expect.
No. Rio Tinto refused to comment on reports that it had hired Deutsche Bank to help sell stakes in two struggling thermal coal mines in Queensland — the Clermont and Blair Athol mines — according to the article.
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