Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
Inaction in making Australia’s tax system more competitive would have a significant impact on the mining sector and the billions of dollars and thousands of jobs it creates.
The warning in new research by Deloitte Access Economics comes as the Senate is due to debate this week the Turnbull government’s 10-year tax plan to reduce the corporate rate to 25 per cent.
The report prepared for the Minerals Council of Australia says Australia’s 30 per cent corporate tax rate is higher than OECD countries with significant mining activity, such as Canada (26.7 per cent) and Chile (24 per cent).
“This higher taxation rate, in turn, lowers returns on foreign investment in mining, which can influence the decision-making of foreign investors determining where to invest capital,” the report says.
This is compounded by state and territory royalties, which when combined with the company tax rate produces an effective tax rate of 54.3 per cent, as of 2014/15.
The report estimates mining and the mining equipment, technology and services (METS) sector directly contributed $133.2 billion to the economy in 2015/16, employing 484,114 full-time jobs.
Deloitte modelling calculates the indirect contribution from other industries, such as petroleum, electricity and manufacturing, into mining adds a further $103.6 billion and 655,654 jobs.
In total, both directly and indirectly, mining represents around 15 per cent of the economy and 10 per cent of the workforce.
Aside from a competitive taxation system to sustain mining’s economic contribution, Deloitte says there also needs to be policies to make workplaces more flexible, foreign investment more open, affordable and reliable energy and streamlined regulation.
“The risks of inaction in these areas are significant,” Deloitte concludes.
“Supportive and flexible policy settings helped to establish the most recent mining boom … it is critical that governments pay heed to these key policy areas and initiate reforms where improvement is required, so that mining and METS continue to innovate and grow, helping to secure Australia’s future prosperity.”