FED:Govt set for MRRT showdown with states

AAP General News (Australia)
12-21-2010
FED:Govt set for MRRT showdown with states

By Andrea Hayward, Lisa Martin and Rebecca Le May

CANBERRA, Dec 21 AAP - The premiers of Queensland and Western Australia have flagged
their resolve to fight any potential move to cap state-based mining royalties by the federal
government.

The federal government is poised for a showdown with the states after a report into
its proposed minerals resource rent tax was delivered by the MRRT policy transition group
(PTG) on Tuesday.

Treasurer Wayne Swan said the government would carefully consider the 94 recommendations
made by the PTG before responding early next year.

"I don't intend to endorse or reject every recommendation today but I can say this:
there is a lot of commonsense in this report," Mr Swan told reporters after the report's
release.

Crucially, the report recommended that all current and future state and territory royalties
be credited against tax liabilities.

This recommendation contradicts the government's stance to limit credits to only state
royalties existing at May 2, 2010.

Mr Swan said any decision on the treatment of royalties would go through the usual
cabinet processes "first and foremost" but also with the resources sector and the states.

But the battle lines have already been drawn by WA and Queensland, which reap the benefits
of royalties the state governments charge, as the owners of minerals in the ground, for
the right to extract a mineral resource.

"We've made the point all the way through this that we can't give a green light to
the states to increase royalties endlessly," Mr Swan said.

"Nobody wants to tilt the balance from a profit-based tax towards inefficient royalties.

"That wouldn't be in the interests of our country and it certainly wouldn't be in the
interests of industry."

The policy transition group said the government needed to put in place arrangements
to limit incentives for the states to increase royalties over time.

But Queensland Premier Anna Bligh told reporters her state would not give up the right
to set royalties for its resources.

"We reserve the right to determine the appropriate royalties as a return for the minerals
taken out of our state," Ms Bligh told reporters in Brisbane.

"We will certainly be maintaining our right, completely, to set royalties not only
now, but I would expect any Queensland government of any political persuasion forever.

"If that has consequences for federal arrangements that would be something that needs
to be negotiated frankly between the mining companies and the federal government."

WA Premier Colin Barnett said his state would never agree to imposing a cap on state
mining royalties.

Mr Barnett said minerals in WA belonged to the people of WA and the government would
always retain the right to vary those rates as circumstances dictated.

He said there was no proposal to increase royalties in the medium term but if the Commonwealth
continued to reduce WA's GST revenue, "the state government may have no choice but to
increase royalties just simply to maintain essential services".

"My advice to Julia Gillard is: have a nice Christmas, a happy new year, sit down quietly
and think about it and realise that this tax proposal is a dog."

Miners tentatively welcomed the PTG's recommendations.

"It is now crystal clear that all current and future royalties must be credited against
MRRT (minerals resource rent tax) liabilities, as the industry has maintained throughout
the debate," the Minerals Council of Australia said.

Rio Tinto said it would take time to fully consider the 94 recommendations, but it
was encouraged to see that many of the key issues raised through the consultation process
appeared to have been appropriately recognised by the PTG.

It also welcomed the royalty creditability recommendation.

AAP ah/apm

KEYWORD: MRRT 2ND WRAP

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