The mining industry has reacted angrily to the Queensland Government's decision to increase state taxes on coal from 10% to 12.5% for every tonne of coal sold between $100 and $150. Coal traded over that price will be taxed 15%. The Government hopes to raise $1.6 billion over the next four years from the increased taxes to help address the state deficit of nearly $11 billion.

 

The budget announcement came a day after announcements from BHP Billiton and Xstrata Coal of mine closures and project delays due to economic conditions affecting the coal industry.

 


The Queensland Resources Council has attacked the hike in coal royalties, saying it will mean more job losses, the risk of further mine closures and the near certainty that numerous major new coal projects will not see the light of day.

 

 

Chief Executive Michael Roche said the Newman Government inherited the highest coal royalties in Australia but “their own hike could see Queensland grab the dubious honour of being the highest taxing coal jurisdiction in the world.”

“The combination of company income tax and the new royalty rates will mean Queensland carries an effective taxation rate of 50 percent on a typical coking coal operation.”

Mr Roche said the coal industry had been given many opportunities over recent weeks to explain to the government the current parlous market situation and the implications for jobs and investment of increasing coal royalties.

“The trouble is the Newman Government seems to have been listening to industry but not comprehending what they were hearing,” Mr Roche said.

“The government was told that the average cash cost for Queensland coking coal mines – before imposts such as carbon tax, company tax and depreciation – is now over $US100 per tonne.

“Yet they have deemed fit to lift the royalty rate for coal sold above $100 per tonne by 25 percent and introduce a new levy of 15 percent once the price hits $150 a tonne – a whopping 50 percent increase.

Mr Roche said his fear was that the new royalty structure would drive coal industry investment away from Queensland and into the arms of competitors.

“For some existing high cost coal mines, the new royalty structure could be the final straw.”

Mr Roche said that rubbing salt into the industry’s wounds, the government had also refused a plea to index coal royalty thresholds.


“Like tax bracket creep, over time royalty thresholds erode with inflation and indexation is a way of offsetting the negative project value impacts of higher royalties over the 20-year-plus life of a coal mine investment.

“I also want to dispel any notion that coal companies will be able to offset these new state taxes against federal Mineral Resource Rent Tax (MRRT) obligations.

“The MRRT is a federal tax on super profits, and right now, it’s hard work to find a coal mine in Queensland making a profit, let alone a super profit,” he said.

The QRC has acknowledged the government’s establishment of a new Resources Committee of Cabinet to focus on regulatory and other impediments to the productivity of the resources sector in Queensland.

“The QRC has identified a priority list of impediments requiring the urgent attention of the new Cabinet Resources Committee,” Mr Roche said.

“Swift and decisive action on productivity and cost impediments will be vital in helping Queensland salvage something from today’s huge budget blow to its reputation as an attractive resource sector investment destination.”