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.