Article by Matthew Killoran courtesy of the Courier Mail.
MINING companies will be slugged six times as much as the Queensland government rakes in billions in forecast royalties, a new analysis reveals.
Wood Mackenzie, a global consultancy company that does work with the resources industry, has done analysis of the new royalty regime, which came into effect on July 1 and was expected to raise $1.2bn over four years.
Its analysis claims that it could raise $5.9bn more than the old tax would have in its first year alone. This is expected to be about $1bn more in the second year, before normalising in the 2024 and 2025 financial years.
“Queensland coal producers – already paying the highest royalty rates globally – will be significantly worse off,” according to the analysis obtained by The Courier-Mail.
“A key concern for Queensland producers will be project development as financing becomes more difficult with traditional lenders and banks no longer willing to offer debt services.
“The new royalty hike will eat into cash flows when prices are high, which will reduce the value of existing operations and projects.”
The new royalty regime adds three tiers to the existing tiered structure, with the top rate being raised from a 15 per cent tax to a 40 per cent hit.
Companies now pay 20 per cent in the dollar when prices exceed $175 per tonne, 30 per cent in the dollar when prices climb beyond $225 per tonne and 40 per cent when they exceed $300.
Royalties are levied against revenue, not profit, which means company costs and future investments are not taken into consideration.
The budget papers argued that the “exceptional surge in coal prices” last year and now meant the state’s royalty structure did not “provide a fair return to Queenslanders” during boom periods.
Minerals Council of Australia (MCA) released a report showing that the mining industry paid a record $43.2bn in company tax and royalties, paid in financial year 2020-21, up 16 per cent on the previous year.
MCA chief executive Tania Constable said the amount of company tax and royalty was expected to increase again next financial year.
“The Australian mining industry always pays its fair share of tax, while providing royalties to state governments to pay for improved roads, hospitals and other infrastructure and services,” Ms Constable said.
A spokesman for Treasurer Cameron Dick said the forecast returns were based on coal price modelling by Queensland Treasury.
“If prices go higher, any additional royalties generated would only be a fraction of the additional profits that coal companies would enjoy.”