BHP and Rio face fresh tax threat in WA – by Tess Ingram and Peter Ker (Australian Financial Review – May 28, 2017)

Iron ore giants BHP Billiton and Rio Tinto are facing a fresh tax grab in Western Australia just months after seeing off the WA Nationals’ concerted push to slap the miners with a tax hike that would have cost them about $3 billion a year.

West Australian Premier Mark McGowan confirmed on Sunday the new Labor state government would ask BHP and Rio to “buy out” the 25¢ lease rental fee they pay on every tonne of iron ore produced to provide a potentially multibillion-dollar injection to government coffers.

At current production rates BHP and Rio would collectively owe WA about $150 million a year in lease rental fees, and while there was no clarity on the number of years’ fees WA wants paid up front, the bill would rise to $4.5 billion if the two miners paid 30 years’ worth of fees in a lump sum.

The highly conditional plan relies on approval from the state, the miners and the Commonwealth government, which Mr McGowan hopes would exclude any lump-sum payment from GST distribution calculations.

“All those negotiations and discussions have to occur and they haven’t occurred yet,” Mr McGowan said. The surprise move comes as the cash-strapped government searches for ways to repair its balance sheet, with state debt forecast to hit $42 billion by 2020. The budget deficit for 2017-18 has been forecast at around $1.6 billion by the McGowan government. The iron ore price slumped on Friday to $US57.91 a tonne, its lowest since October 17, 2016. The bulk commodity has averaged $US70.82 a tonne since July 1, 2016.

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