100 percent owned II

Last night Garnaut made the point, more than once, that mineral rights belonged to the Crown and the State Crowns in particular. The Rudd government has been running a campaign saying that ‘all Australians’ own those mineral rights. Hopefully the issue will be tested in the High Court. From the Australian Constitution

114. A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.

Well now. That might be a problem.

Under the federal government’s plan, the new tax would be imposed on profits earned by mining companies, not the resources themselves.

But Mr Blakiston and several other senior lawyers believe the commonwealth might have trouble with Section 114 because the profits are what lawyers refer to as the “fruits” of state-owned property. Section 114 could come into play because the super-profits tax would give mining companies a federal tax credit for their royalty payments to the states and would then require a payment to the commonwealth.

Unless the legislation imposing the tax differs significantly from the government’s public statements, Mr Blakiston and several senior lawyers believe it could come extremely close to being an impermissible federal tax on state-owned property.

The Australian article also points to section 55 of the Constitution

55. Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

Laws imposing taxation except laws imposing duties of customs or of excise, shall deal with one subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only.

saying that this is an impediment to how the modified Brown tax could work. I don’t think that’s quite right. Taking a share of the proceeds of the project is an ‘as if’ assumption, not how the tax actually works. Tax refunds and how they are accounted for is part of taxation law. But where it does bite is on the question of whther the government can legitimately link superannuation and company tax cuts to the RSPT. I don’t think that they can – each would be a separate bill and the superannuation bill, while having tax consequences, would not even be a money bill.

All up the legal arguments are going to be fun to watch.

This entry was posted in Mining Tax. Bookmark the permalink.

8 Responses to 100 percent owned II

  1. Rococo Liberal says:


    There is a strong argument that the RSPT is an income tax. There is also an argument that the state royalties are in fact an excise. The RSPT is probably illegal because it taxes the property of the States and the roylaties are illegal because the states aren’t allowed to levy excise.

  2. Sinclair Davidson says:

    RL – fantastic. 🙂

  3. Royalties are not the same as an excise, however. Royalties are not imposed through legislation; they’re a contractual payment for granting the right to extract and sell something that belongs to the Crown in right of the States and Territories.

    As for a challenge under s 114, I don’t think it would succeed. It seems like a bit of a stretch, especially when the High Court has for decades failed to see a bit of Commonwealth aggrandisement it didn’t approve of.

  4. Of course I am not a lawyer, seek professional legal advice yadda yadda

  5. Butterfield, Bloomfield & Bishop says:

    How are profits the property of the state?

  6. Pedro says:

    I think that claim is crap. Section 114 is to stop the Comm levying a tax on the States, not on mining companies. The RSPT is just a different way of calculating and taxing income and deductions or credits. You can find a lawyer to support just about any proposition.

    The excise claim is a big one:
    The royalties are the price paid for the exploitation of the property of another, the State in the mining case.

  7. Sinclair Davidson says:

    Pedro – the royalties might look like an excise because of the pricing formula, but is it reasonable to prevent the states from selling their property because the pricing formula looks like a tax?

    The ABS doesn’t classify royalties as state taxes at all.

  8. Pedro says:

    Sinc, I’m not sure I follow you here
    “but is it reasonable to prevent the states from selling their property because the pricing formula looks like a tax?”

    I don’t think the RSPT is reasonable, but equally I don’t think that would be a constitutional objection to the tax. the feds could killing mining with lots of different taxes.

Comments are closed.