31 October 2012

Government seeks feedback on mining reviews

The Government is calling for public feedback on proposed changes to royalties and the taxation of minerals.

Two papers – Reviewing the Royalties Regime for Minerals and Taxation of Specified Mineral Mining – have now been released for public consultation. The royalties paper sets out proposals related to Government revenue from minerals, not oil and gas. The tax paper also excludes oil and gas from its proposals, as well as coal.

“Minerals are important to New Zealand’s economy,” Mr Heatley said.

“New Zealanders are generally comfortable with mining so long as it’s done safely and responsibly, with a strong regulatory framework.

“And they know that the royalties and taxes the Crown gets from mining companies pay for hospitals, school and roads. There is real potential for that contribution to grow,” he said.

The royalties review recommends higher royalty rates for large and highly profitable mining operations. However, the new rates would only apply to new permits – existing permits and licences would retain the royalty rate that currently applies.

“The suggested rates in the royalty review would ensure that New Zealand receives a fair financial return from future development of its mineral estate, while keeping New Zealand’s royalty rates internationally competitive, particularly when compared to Australia,” Mr Heatley said.

Revenue Minister Peter Dunne said it was also important that mining companies paid an appropriate level of tax.

The taxation paper suggests more closely aligning the current concessionary tax regime for certain minerals with general tax principles that apply to other forms of investment.

Specifically, the review suggests removing immediate tax deductions, or in some cases tax deductions in advance, for expenditure that would normally be capitalised and depreciated over the useful life of the asset.

“This approach is in line with the Government’s continuing focus on ensuring that everyone pays their fair share of tax,” Mr Dunne said.

“The mining sector is important but we must ensure that the tax rules do not give the sector an unfair advantage over other investments which may have higher pre-tax rates of return.”

The Reviewing the Royalties Regime for Minerals paper focuses on the royalty rates applied to coal, gold, silver, platinum group elements, ironsands, phosphates and seafloor massive sulphides.

The Taxation of Specified Mineral Mining focuses on the tax rules that apply to miners of specified minerals, including gold, silver and ironsands.

Both sets of proposals aim to enhance economic efficiency by ensuring that scarce resources are directed to economic activities that provide the highest returns before the imposition of tax and royalties.

Submissions on the proposals close on December 7.
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