Tax rate 'uninvestable': Rio Tinto

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey
Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey
Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

Rio Tinto's Phil Edmands said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues Photo: Sean Davey

A top mining executive has warned the industry's global competitiveness is at stake amid claims it should pay more tax, as a new survey shows the combined tax take on resources companies surged towards 50 per cent in 2012-13.

The tax take on the mining industry – company tax and royalties – jumped to 47.1 per cent of pre-royalty profits in 2012-13, the highest in the six years covered by the survey. It was 43.2 per cent the previous year.

The take is heading higher because minerals price plunges and state royalty hikes have continued since 2013, predict the survey authors, the Minerals Council of Australia and Deloitte Access Economics.

Phil Edmands, managing director of Rio Tinto Australia, said corporations and miners especially were "usual ­suspects" in the quest by governments for more revenues to plug stubborn budget deficits.

"But really, you do need to ask the question, 'what is a reasonable amount of tax to pay and what is competitive'?" he said. "You can't ultimately degrade the competitiveness of the country simply by taxing more and more because there is some profit left."

Mr Edmands said the total tax take found by the rate was in line with Rio Tinto's global tax rate in 2012-13, while the company's tax take in Australia – where it pays the vast bulk of its taxes – would have been a little bit higher.

He said this was a fair amount of tax but it was high relative to competitors, and any further increases would handicap Australian miners in the global battle for investment capital.

"That is fair and that is reasonable, and given that it is actually high ­compared to competitors, there's not really scope for increased taxation," Mr Edmands told Fairfax Media.

The 47.1 per cent tax take found by the latest minerals industry tax survey for 2012-13 includes corporation taxes and state royalties. It compares with an average 42.5 per cent rate over the six years since 2007-08 and a low of 39.8 per cent in 2010-11, the year ­industry profits peaked.

The survey of 24 companies covering about 84 per cent of mining income does not include the mining tax and carbon tax. These were enacted by Julia Gillard's Labor government and repealed by Tony Abbott's Coalition government this year.

State royalties are levied on revenues rather than profits. Unlike corporation taxes, royalties increase as a percentage of profits as mineral prices and profits fall, but they fall as a percentage in ­rising minerals markets such as the five boom years to 2008-09.

Western Australia raised its iron ore royalty rate in 2012 and again in 2013. Queensland raised its coal royalty rate for coal sold at $100 a tonne or more in 2012. Royalties as a share of pre-royalty profits jumped to 24.4 per cent in 2012-13, from a low of 13.9 per cent in 2010-11.

Minerals Council deputy chief ­executive John Kunkel said the overall tax take had been pretty high and stable for most of the six years covered by the survey period.

But it was now pushing up towards 50 per cent, a rate at which things become "uninvestable".

He said there was some global evidence that once you get to that point, "it's very hard to attract investment in the competitive global regime".

"The government has a tough job on the fiscal side but you can't ignore the [issue of] structural competitiveness as well," Mr Kunkel said.

Rio Tinto paid $US5.7 billion ($6.9 billion) in Australian corporate taxes and mining royalties in 2012-13, and $US1.1 billion in the US, mainly payroll taxes.

This story Tax rate 'uninvestable': Rio Tinto first appeared on The Sydney Morning Herald.