Constitutional State Right’s Fight Looming

Constitutional State Right’s Fight Looming

Western Australia Premier Colin Barnett

Premier Colin Barnett’s Response To The Argus Report

Victor P Taffa

The Release of the Policy Transition Group (PTG) report on the implementation of the Commonwealth’s new Resource Taxation Reforms has done little to address Western Australia’s concerns with the proposed arrangements.

Premier Colin Barnett said the Western Australian Government remained strongly opposed to the Commonwealth’s proposed tax regime, which represented an unwelcome intrusion into the State’s Constitutional Rights over a very important Revenue Base.

Importantly, the Commonwealth Government had not responded to the report’s recommendations and indicated it would respond in early 2011 following discussions with State and Territory Governments.

The Premier indicated that the lack of meaningful consultation to date was a major concern and had created a high level of uncertainty for resource companies and the State.


The Premier also said the report did not adequately address the issues associated with the crediting of State Royalties.

“While the PTG recommends the crediting of all current and future State royalties, it also recommends that the Australian, State and Territory Governments put in place unspecified arrangements to ensure that State and Territory Governments do not have an incentive to increase royalties on coal and iron ore.  This will effectively prevent the crediting of future royalty increases.” Premier Barnett said.

“Any capping of State royalties may provide some grounds for a constitutional challenge to the MRRT, but this will be dependent upon the actual arrangements that are put in place.” Premier Barnett said.

Other concerns relate to the inclusion of magnetite iron ore within the MRRT, and the application of the $50 Million annual exemption threshold.

“I personally wrote to the Prime Minister seeking the exclusion of Magnetite Iron Ore from the MRRT to ensure equitable treatment with other highly processed minerals, such as Gold and Nickel, and that the development of the Emerging Magnetite Industry is not jeopardised by the new Tax.” Premier Barnett said.

“The Prime Minister referred this matter to the PTG and it is disappointing to see that the PTG recommends that all mining activities involving the depletion of iron ore and coal should be subject to the MRRT, including magnetite iron ore.”

“Western Australia also believes that the $50 Million threshold should be applied as an annual tax-free threshold, with miners only liable for the MRRT on the portion of their profits above the threshold.  This approach would reduce the potential distortionary impacts of the threshold.” Premier Barnett said.

“However, the PTG continues to recommend that the threshold apply at $50 Million, although the full rate of tax would only be phased-in.” Premier Barnett said.

The Premier indicated that other issues of concern to the State with the mining tax package have simply not been addressed by the PTG.

“This includes continued uncertainty of revenue sharing arrangements with the Commonwealth for the North West Shelf and Barrow Island, and the operation of the Regional Infrastructure Fund.” Premier Barnett said.