Prices set to boost mining tax

The Gillard government’s mining tax should bring improved revenue flows when the big mining companies send in their March-quarter receipts over the next 10 days.
Nanjing Night Net

While almost certain to fall short of the $2 billion in receipts forecast by Treasury for this financial year, the three commodities captured under the tax have been fetching higher prices in the past three months than during the December and September quarters.

The tax operates under a complicated system that is difficult to predict, but higher prices for iron ore, coking coal and thermal coal are the best indicators the tax will bring in more than the $126 million raised in its first six months.

The average iron ore price in the past three months was slightly more than $US148 a tonne – a 23 per cent improvement on the $US120 a tonne averaged in the December quarter.

The amount of iron ore sold in the March quarter was hampered by cyclone interruptions in the Pilbara, but these lost sales will be partially offset by the expansion programs in which companies such as BHP Billiton constantly increase their volumes of iron ore exports.

Coking coal prices improved more modestly, with the average price for the March period being 7 per cent better than during the December quarter.

Data compiled by the McCloskey Group suggests the benchmark thermal coal product exported from Newcastle fetched an average price of $US91.62 in the March quarter – 9 per cent better than the December quarter.

Treasury and Australian Tax Office officials will appear before a Senate inquiry into the tax on Wednesday, where the gap between forecast revenues and receipts will be investigated.

Some experts have been warning since August 2012 that mining companies would use their deferred tax credits to reduce the amount they pay, yet no action was taken to close the loophole.

In March, Rio Tinto estimated its deferred tax credit stood at $1.2 billion, while it also reported a further $12.6 billion worth of possible tax credits that were not yet formalised.

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