NSW may raise coal royalty rates

Monday, June06, 2011
By Cole Latimer, Mining Australia

New South Wales may follow Western Australia’s lead as premier Barry O’Farrell considers raising royalty rates on coal.

O’Farrell is refusing to rule out a potential increase of the rates in upcoming state budget in September, the Australian reports.

The premier’s position generated a warning from the federal treasurer’s office, with a spokesperson saying “Mr O'Farrell shouldn't go down the same hypocritical path of (West Australian premier Colin) Barnett, who said repeatedly the mining companies can't afford to pay more tax, but then hiked royalties, supported by Tony Abbott, who also said miners could not afford to pay more tax."

Western Australia’s announcement of an iron ore fines royalty rates increase in its latest state budget has drawn criticism from federal treasurer Wayne Swan.

The Federal Government is predicted to lose around $2 billion under Barnett’s rate increase, as under the mining tax it is forced to refund miners royalty rates, otherwise the mining industry would be hit twice by both the mining tax and state royalty rates.

The State has been threatened with infrastructure funding cuts if its does not rescind the royalty increase.

While federal finance minister Penny Wong denied that WA would be ‘punished’ over its royalty decision, she did say that that state will suffer consequences such as a cut to proposed infrastructure funding.

Mining royalties in NSW, 95% of which come from the coal industry, will generate around $6.8 billion for the state over the next few years.

Current royalty rates stand between 6.2% and 8.2%, depending on the depth of the coal.

Royalties are a state taxing instrument. They have gone up, they have come down, and as far as I'm concerned that's how it should be,” O’ Farrell told Sky News.

"That's an issue for state governments to determine. It's not an issue for us to be limited by federal governments. The same applies in relation to the gaming tax. I'm prepared to defend state revenues in the face of increasing attacks by federal governments.

“I'm not going to flag whether royalties are going up or down.”

The increased royalty rates in WA is set to reap the state around $4 billion annually.