The mining giants are about to pick a second tax fight with the government by demanding an exemption from the impact of a carbon price on operations where the mining tax will apply.
In a submission to the policy transition group which is negotiating the fine print of the revamped mining tax, the Minerals Council of Australia says ”carbon costs in whatever form should be deductible to the extent imposed on activities up to the taxing point”.
The miners believe the net effect of taxes they pay - company tax, state royalties and the Minerals Resource Rent Tax - should not exceed 45 per cent.
The government is at least a year away from deciding how it will put a price on carbon. The Prime Minister, Julia Gillard, has left open the option of an emissions trading scheme, a carbon tax or a hybrid of both.
Each option will increase the cost of mining, with increased energy bills.
The minerals tax, legislation for which is due to be put to Parliament in the second half of next year, will apply to iron ore and coal.
The Minerals Council, which represents BHP Billiton, Rio Tinto and Xstrata, believes extra costs should be waived for iron ore and coal mines. Otherwise the net effective tax rate could be pushed above 45 per cent.
“Allowing a deduction for carbon costs up to the taxing point is entirely consistent with established practice for a resource-based tax,” a spokesman for the Minerals Council said.
”It is also consistent with the federal government’s Carbon Pollution Reduction Scheme tax which was deductible against taxable income.”
BHP and Rio have senior executives advising the government on the carbon price policy.
The Minerals Council will meet the policy transition group, including the Resources Minister, Martin Ferguson, and the former BHP chairman Don Argus, on Thursday.
The 28-page Minerals Council submission, which was co-written by BHP tax executives, also restates the miners’ insistence that the proceeds of the rent tax be used to reimburse them for present and future state royalties. Under the first version of the tax, the Resources Super Profits tax, miners were to be compensated for royalties at May 2, 2010, levels plus any scheduled increases that were known at the time.
When the tax was renegotiated just before Ms Gillard called the election, the rider was dropped and the new agreement said ”all state and territory royalties” would be refunded.
The miners argue that if the states and territories continue to increase royalties, the proceeds of the tax should be used to compensate them.
Ms Gillard has ruled this out. Otherwise the states could keep increasing royalties until they had taken all the tax proceeds.
The Minerals Council submission argues: ”Any recommendation that would result in a limitation being placed on the credit available for state and territory royalties is contrary to the heads of agreement and should not be contemplated. [Miners] should not be placed at the centre of intergovernmental disputes about respective revenue shares.”
