The nation’s biggest gold miners have ramped up their campaign against the WA government over its plans for tax hikes claiming it will cost jobs in an environment of low profit margins.
But WA Treasurer Ben Wyatt hit back saying the gold sector was spending millions of dollars on lobbying against the tax rather than contributing a “fair share” towards budget repair.
The state government is struggling under ballooning debt, which is why in the WA budget it announced a rise in the gold royalty rate and in payroll tax rates.
The government wants to raise $392 million over four years by increasing the royalty rate from 2.5 per cent to 3.75 per cent. The higher rate, for miners producing more than 2500 ounces of gold a year, only kicks in when gold is worth $1200 an ounce.
On Wednesday the industry held a media roundtable where executives from some of the nation’s biggest companies, including Newcrest Mining’s chief executive Sandeep Biswas, labelled the royalty increase an “ill-considered grab for cash”.
Mr Biswas said profit margins across the gold sector were not strong enough to absorb the royalty rate increase and warned the company may have to halt its plans to expand its Telfer mine, which employs 1550 people, including many indigenous locals.
“Telfer is a marginal mine and if this increase proceeds, it will wipe out Telfer’s earnings, making its expansion uneconomic,” he said.
Global miner Gold Fields chief executive Nick Holland said royalty hikes always led to less overall tax for governments because they damaged companies and therefore result in lower economic growth and employment.
Managing director of Saracen Mineral Holdings, Raleigh Finlayson, called the government’s decision “ill-informed” and “ham-fisted”.
But WA Premier Mark McGowan has said the industry’s claims of jobs losses are “completely overblown” and Mr Wyatt is continuing to push for the royalty increase.
The measure now relies on support from the Liberal Party after crossbenchers and the Nationals announced they would oppose it in the Upper House. Some Liberal Party MPs have already signalled they would oppose the tax.
“I won’t be swayed,” Mr Wyatt told reporters.
“I think the people of Western Australia understand that they can’t be looked to do all the heavily lifting. The mining sector, the gold sector specifically, can contribute only $20 an ounce at a current price of around $1650 an ounce.
“It’s a fair request, and I say to the gold sector, stop wasting your money spending millions of dollars on lobbyists.”
The state government also wants businesses with national payroll of between $100 million and $1.5 billion to pay a 6 per cent payroll tax rate (up from 5.5 per cent), and those with a payroll of more than $1.5 billion to pay a 6.5 per cent rate.
The Chamber of Minerals and Energy (CME) has claimed that the royalty increase could see almost 3,000 job losses in the gold mining sector – and thereby potentially $44.9 million of royalties.
“No industry can cope with an unexpected 50 per cent increase in a major cost,” CME chief executive Reg Howard-Smith has said.
CME said of the $5.7 billion in royalties the state government received in 2016–17, mostly from iron ore miners, the gold sector contributed $263 million.