Fortescue Metals Group urged all Australian Parliamentarians to realize the unfairness (among players in the same industry) and failures of the Mineral Resources Rent Tax (MRRT) draft bill introduced to Parliament November 2, 2011. Fortescue Chairman Andrew Forrest explained that Fortescue, as a major iron ore producer, was a glaring example of the unfairness of the MRRT as it would be paying less tax than its junior counterparts.
“We cannot have an unfair tax,” Forrest said. “Being ill conceived, poorly negotiated by government, and finalized in a shroud of secrecy and exclusiveness with the world’s biggest mining companies, this tax is unfair and a penalty on smaller mining companies.”
Forrest said the MRRT will ensure the world’s biggest miners have an unfair advantage in the marketplace by reducing their overall unit cost compared to the smaller miners. “It will reduce investment in Australia. This will happen measurably and instantly for early stage iron ore and coal projects as investors are encouraged to invest in projects and employment opportunities away from Australia,” Forrest said. “Mining is the backbone of the Australian economy which this tax will hurt. If it has to come in there must be tax equality between all companies. If the tax cannot be overturned, then amendments must be introduced to at least make it fair.
“To ensure at least some transparency, the government must release the assumptions and financial modeling it has used to estimate forecast revenue from the MRRT,” Forrest said. “In its present form, the bulk of the tax revenue will only come from the junior mining sector.”
The current structure of the MRRT allows the biggest mining companies a deduction on their overall MRRT tax liability, based on either the book value or market value of their separate relevant coal and iron ore projects as of May 2, 2010. These deductions are not available to smaller or intending producers who, because of this tax, are now instantly less competitive against the world’s biggest miners. Smaller producers in the global market will be significantly weaker compared with a large producer because of the value of the above mentioned deductions (known as starting base allowances).