Now no one is saying the Commonwealth is a gold digger,
but it clearly isn't messing with no broke diggers. Well at
least that's not the intention of the Mineral Resources and
Rent Tax (MRRT) which since 1 July applies to 30% of the taxable
profit of all new and existing iron ore and coal projects in
Australia. The taxing of companies and private entities is nothing
new so what exactly is Fortescue Metal's High Court challenge
The Australian Constitution provides that the Parliament
can't make tax laws which would discriminate between States or
parts of States and expressly prohibits federal taxes on State
Fortescue argues that the MRRT offends both of these
restrictions and contravenes the constitutional right of States to
deal with their own assets and property in a way they see fit
(minerals are owned by the Crown until they're dug up).
The Queensland government has joined the challenge.
So will they win? Here are the main arguments for and
For the challenge
The MRRT discriminates between States by depriving
resource-rich States of the right to encourage mining and attract
investments based on the bounties of mining exploration.
Natural resources such as coal and iron ore belong to the
States and the Commonwealth is unconstitutionally taxing those
Against the challenge
Since the MRRT applies at the same rate to all States it is
not discriminating between the States.
The MRRT is not a tax on minerals but a tax on profits and
that is not unconstitutional.
The Crown owns minerals and the Crown means the
Commonwealth not the States, there is therefore no tax on State
The MRRT is estimated to generate over $13.4 billion in revenue
over the next four years. Despite the fears that it will drive away
investment and growth, many prominent industry figures argue that
the same issues of sovereignty and regulation exist in North and
South America with no effect on the attractiveness of those mining
And then there's the politics...
While the arguments against the tax have merit we're placing
our bets on a loss. The High Court is generally protective of the
Federal Government's taxing powers and we think it will uphold
the MRRT. We'll keep you posted on how it all unfolds.
We do not disclaim anything about this article. We're
quite proud of it really.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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