The Country Liberal’s promise to adopt a simplified tax regime for the mining industry has received strong support from the Association of Mining and Exploration Companies, saying it could unlock the economic potential in the Territory.
In a statement released on Thursday, CLP Leader Lia Finocchiaro said, if elected, the party would scrap the Gunner Government’s “complicated” hybrid mining tax model and implement an ad valorem royalty system, similar to that of Western Australia, to drive investment and job creation in the Territory.
An ad valorem royalty tax is one charged as a percentage of the price or value of product sold.
“We needed to be a jurisdiction open for business prior to COVID because of course we have had the worst performing economy in the nation for some time,” Ms Finocchiaro said in an interview on Mix 104.9.
“Particularly now, post-COVID, we need some strong, clear signals being sent to industry about what the Territory is capable of by simplifying the taxation regime for the mining industry.”
Ms Finocchiaro said the ad valorem model not only gave certainty to prospective investors and existing operators, it also gave certainty to the Territory about the revenue it would receive.
AMEC chief executive officer Warren Pearce said in a statement that CLP’s proposal answered the industry’s call for a simpler royalty structure. Mr Pearce said that AMEC had been calling for the Territory royalty regime to adopt an ad valorem model since the Revenue Discussion Paper in 2017.
“The government changes in 2018 to the profit-based royalty, which bolted on a staggered ad valorem rate, gave the Northern Territory Australia’s most complex royalty system,” Mr Pearce said.
He also said that CLP’s bid to adopt a pure ad valorem regime would increase certainty and transparency for companies making investment decisions, Treasury officials’ budgeting, and confidence in the community about what they get back for their minerals.
Mr Pearce said that was because it set a royalty as a percentage of the value of the mineral, the percentage could be adjusted to reflect the amount of local processing that had occurred.
The current hybrid model is a mixture of a profits-based and ad valorem system.
From July 1 last year the hybrid mining taxation scheme had required mining companies to pay the greater of the existing 20 per cent profits-based scheme, or a value-based royalty on their gross mineral production revenue at a rate of 1 per cent in a mine’s first mineral royalty year on or after July 1, 2019; and 2 per cent in the second mineral royalty year; and 2.5 per cent in the third and following mineral royalty years.
“The volatility of the current royalty regime makes it difficult for potential investors to calculate the rate of return on a project and makes the government’s task of budgeting much harder,” Mr Pearce said.
Ms Finocchiaro said the combined 20 per cent profits tax and ad valorem hybrid model wasn’t working.
“This model is a huge deterrent to businesses investing here,” she said.
“The Territory needs to be an attractive destination for mining investment to create jobs for Territorians. Moving to an ad valoremonly model will also bring the Territory in line with other Australian jurisdictions.”
Ms Finocchiaro also said that the current hybrid mining tax sends a signal to investors that it is difficult to do business in the Territory.
“Mining is such an important part of the Territory’s economy contributing $5.7 billion and supporting more than 7,000 jobs, but the Gunner Government isn’t allowing it to reach its potential with its hybrid tax model,” Ms Finocchiaro said.
Mr Pearce said that the Territory has a huge opportunity to grow the mining industry, grow jobs, and grow government revenues with its eight operating mines.
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