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NSW hikes mining royalties to offset carbon tax costs
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6th September 2011
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PERTH ( − The New South Wales Treasury on Tuesday announced plans to increase the state’s mining royalties in an effort to offset carbon tax costs.

Treasurer Mike Baird said in his budget speech that the federal government’s proposed carbon tax would cost New South Wales more than A$900-million, and that it would be hit harder than most other states.

“We are prepared to use all means within our power to recover the costs to the state of the [Julia] Gillard government’s carbon tax.

“We are not going to accept a multibillion-dollar hit without taking action to protect the budget on behalf of the people of New South Wales,” said Baird.

New South Wales’ move to increase royalties to undermine the federal government’s proposed tax changes followed a similar move by Western Australia earlier in the year, when it announced higher iron-ore fine royalties of 6.5% from July next year. A further increase to 7.5% will be imposed from July 2013, to equal the royalties imposed on lump iron-ore.

Under the proposed mineral resources rent tax (MRRT), the federal government would refund state royalties to companies under the MRRT.

Baird said that the offset increase in royalties would only apply to those mining companies subject to the Commonwealth’s proposed MRRT.

“Noting the commitment of the Commonwealth to reimburse these companies for their state royalty liabilities, the Commonwealth will bear the cost, not the mining companies. This will deliver Commonwealth compensation to the taxpayers of New South Wales for the carbon tax cost to the state,” said Baird.

He added that the state government would work with the mining sector to implement the carbon tax offset increase, and would finalise details once the Commonwealth’s MRRT legislation was finalised.

However, in an interview with the ABC on Tuesday, federal Treasurer Wayne Swan said that an increase in state royalties would mean “less money for infrastructure in places like New South Wales”.

While Swan said that he wasn’t threatening to “strip them of anything”, he did say that the goods and services tax arrangements were matters for the Grants Commission.

“What we did say is that there will be less money around for other purposes,” he added in the ABC interview.

The MRRT is due to begin on July 1 next year and raise an estimated A$11-billion in its first three years. The Western Australia royalty rise, which also starts from July 1, was expected to reduce that by around A$2-billion.

Edited by: Mariaan Webb


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Mike Baird

Mike Baird