27 May 2010

---

AUSTRALIAN miners suffered a setback in their campaign against the nation’s proposed new mining tax yesterday, with two constitutional experts saying that a threatened court challenge was likely to fail.

Miners including Rio Tinto, BHP Billiton and Fortescue Metals have criticised the 40% tax proposed by Canberra this month, saying it undermines the country’s investment-friendly reputation and will hurt the commodity- dependent economy.

The country’s biggest mining state, Western Australia, is preparing to mount a possible legal challenge against the levy on the grounds that it would exceed the central government’s constitutional powers. The constitution bars central government from taxing the property of the six states, and mineral resources are treated in Australia as though they were the property of the states.

But the experts said yesterday that Western Australia, home to the nation’s 28bn -a-year iron-ore industry, would be unlikely to overturn the tax in court, citing the proposed structure of the tax and legal precedents.

“Challenges rarely succeed and there haven’t been any for some years, partly because the law itself is pretty clear that there is great scope for how the Commonwealth (the central government) levies a tax,” said Prof George Williams, a constitutional lawyer at Sydney’s University of New South Wales.
Another expert agreed, noting the tax would not apply to mineral resources themselves. Instead, it would apply to the profit derived from them.

“Depending on the drafting of the law it seems that a tax on company profits derived from resources, which have become company property, would be unlikely to fall under (unconstitutional taxes),” said Peter Mellor, a tax specialist at Melbourne’s Monash University.

A failed legal challenge would leave Western Australia and miners with only one option: to campaign against Prime Minister Kevin Rudd’s government at general elections likely in October.

The tax, to apply from 2012, is the centrepiece of Rudd’s re- election campaign. It underpins his promise to return the budget to surplus by 2012-13, to cut the company tax rate and to boost retirement incomes .

Fortescue has threatened to pull 15bn in projects while Rio Tinto has put every local investment plan under review. Reuters



<< RETURN