The Chamber of Minerals and Energy WA (CME) strongly opposes the Productivity Commission’s net cash flow tax proposal, which presents a clear and unacceptable risk to the competitiveness of the West Australian resources sector.
Far from boosting national productivity, CME Chief Executive Officer Aaron Morey said the experimental new tax risked having the exact opposite effect and further damaging Australia’s ability to attract international investment.
“This ill-conceived, ivory tower thought bubble is an attack on mining and an attack on Western Australia,” Mr Morey said.
“Introducing a new net cash flow tax would have disastrous consequences for resources investment at a time when our sector can least afford another hit to its competitiveness.
“Australia is already burdened by some of the highest corporate taxes in the world. The effective tax rate for most resources companies is already above 40 per cent when you consider royalties, payroll tax and other levies. That is nearly double the OECD average of 21.2 per cent.
“The resources sector also already accounts for the largest share of corporate tax, including $48 billion in FY24 alone – and that is without considering royalties paid to the WA Government totalling $11.9 billion in the same year.
“Building a bigger and more efficient economy requires removing obstacles to investment, not inventing brand new ways to penalise the companies big enough to deploy the capital required to move the dial on productivity.”
In a report released today, the Productivity Commission has recommended the Australian Government marginally drop the corporate tax rate from 30 per cent to 28 per cent for companies with earnings above $1 billion, while introducing a new net cashflow tax of 5 per cent.
Mr Morey said the proposed system would actively disincentivise resources companies from building the cash reserves they need to fund new projects and send investment offshore.
“Taxing cash flows introduces a perverse incentive not to build the balance sheets required for major new investments in mines, factories, low-emission energy and vehicles and productivity-enhancing technology like AI,” Mr Morey said.
“This is especially damaging when the large businesses being targeted by this tax have no shortage of choice about where they choose to deploy their capital globally.
“The proposal also completely fails to recognise that the resources sector is highly dependent on commodity cycles.
“Discouraging businesses from building cash reserves not only hurts their ability to fund game-changing new projects – it leaves them and their workforces highly exposed during downturns.
“The Commonwealth needs to immediately rule out this proposal to provide companies with the certainty and confidence they need to continue investing in the growth and success of Australia’s most productive sector.”
Media contacts:
Josh Zimmerman j.zimmerman@cmewa.com / 0404 947 719
Natasha Mutch n.mutch@cmewa.com / 0435 383 382