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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-10-26 Daily Xml
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MINING ROYALTIES

The Hon. R.I. LUCAS (15:11): I seek leave to make a brief explanation prior to directing a question to the Leader of the Government on the subject of mining royalties.

Leave granted.

The Hon. R.I. LUCAS: There have been recent stories in the media relating to the potential for South Australian miners to be stung by double taxation as a result of the recent state government announcement of increases in royalties and the recent federal government position in relation to a mining supertax. This story in The Advertiser is one of many:

Mr Ferguson has since said that the government would only refund existing and scheduled royalty increases, and Prime Minister Julia Gillard has confirmed the Federal Government would not honour the original commitment. 'Obviously it is not the government's intention to have state governments able to change royalty arrangements in a way which means the Federal Government foots the bill,' Ms Gillard told parliament last week.

SACOME chief executive, Jason Kuchel, in his letter to Mr Ferguson, said an issues paper released by the policy transition group which is advising on the MRRT stated: 'State and territory royalties will be creditable at least up to the amount imposed at the time of the announcement, including scheduled increases and appropriate indexation factors. It is our understanding that the government's position is that unscheduled royalty increases after May 2010 are not to be creditable against the MRRT,' Mr Kuchel wrote.

My questions to the minister are:

1. Is it correct that, as at May 2010, the state cabinet had not made the decision to increase royalties which was announced in the September 2010 budget?

2. If that is the case, is the minister concerned at the potential for South Australian miners to be confronted with the prospect of not only the MRRT from the federal government but also a significant increase in state royalties imposed by the state Labor government?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management) (15:14): Yes, we would be concerned if the federal government were to breach the understanding that was given at the time in relation to state royalties. I am not sure of the exact date on which there was an official announcement in relation to that, but certainly this government and the Treasurer in particular have made it clear that we were looking for some time at our royalty rates to ensure that, whilst still being competitive with those in other states, the state received sufficient benefit from the exploitation of its resources.

We would certainly be concerned if the state were to be in some way penalised for increasing its royalties, particularly given that our royalties are still very competitive with those in other states. For example, we are the only state that has a concessional royalty for the first five years of operation. That is specifically to make the royalties more attractive for companies to establish mines. We have retained that, with the changes, by having the rate increase from 1.5 per cent to 2 per cent, but that—for the first five years of a mine—is still a very significant concession. To be penalised would be unacceptable to the government.

The Hon. R.I. Lucas: But you hadn't taken your decision.

The Hon. P. HOLLOWAY: It depends, I suppose, on what making the decision means. Certainly, the government had made it clear. I am well aware that the Treasurer has made his federal counterpart well aware of the government's intention in relation to that. My understanding is that he sought clarity of that at the time although, of course, that was originally in relation to a different proposal with the resource super profits tax than the current one.

It is my understanding that, if the Treasurer has not yet sent the letter off to his federal counterpart in relation to this matter, he certainly will be doing so very quickly. I am aware of a draft letter putting very strongly this state's position in relation to state royalties. It would not be acceptable for this state to be penalised (particularly relative to other states) in relation to that matter. It is very clear, under the Australian Constitution, that minerals are a state resource.

While the commonwealth could argue that that profit and the taxing of profits is its constitutional right, it would be most unfortunate—particularly given the erosion of the state taxation base over recent years due to a number of High Court decisions—if the state was to be further squeezed in relation to this matter. I can assure the honourable member and the rest of the council that we will be standing up strongly for our position on this matter.

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