Fortescue fires a warning shot

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 27 Apr 2012   Posted by admin

A war of words between mining magnate Andrew Forrest and the Federal Government has intensified, with the parties trading accusations on the subject of the Minerals Resource Rent Tax (MRRT) and former Prime Minister Kevin Rudd’s removal from office. Mr Forrest, now Fortescue Metals Group chairman, told The Australian on April 18 that he had finalised an in-principle agreement with Mr Rudd on a revised version of the MRRT, which at the time was being discussed in its first incarnation – the Resource Super Profits Tax (RSPT), that would have transformed the politics of the tax.
Mr Forrest explained that his discussions with Mr Rudd centred on a proposal under which mining companies would be given an incentive to reduce their RSPT obligations by generous tax
deductibility provisions for infrastructure spending. According to calculations by Fortescue, this would have seen the company’s RSPT requirements reduced from 40 per cent to 20 per cent as a result of writing off infrastructure investment, and lead to about $200 billion of industry investment in new infrastructure in the course of five years.
According to Mr Forrest, Mr Rudd had planned to unveil the new mining tax agreement on June 25, 2010, however, he was deposed by Julia Gillard on June 24. “The Prime Minister’s office was
desperate to get the deal finalised and announced that week,” Mr Forrest told The Australian.
“We sensed something was happening, but we had no idea Rudd was about to be removed as Prime Minister. “By Monday night [June 21], we felt we had an agreement. On Tuesday [June 22], Rudd told me he had the Cabinet with him. I wasn’t trying to hide what was happening, and that week I told people the Resource Super Profits Tax, as we know it, is dead.”
The claims have led to a slinging match, with Treasurer Wayne Swan dismissing Mr Forrest’s comments as “conspiracy theories”, while Ms Gillard reportedly described his revelations as “old nonsense”.
However, Mr Forrest promptly hit back in a statement on April 19. “The non-denials and obfuscation by the Prime Minister and the Treasurer relating to the key events that led to the previous Prime Minister’s removal from office need to be addressed,” he said.
“It is a matter of fact that there was an agreement in-principle, taken at the highest levels of the Australian Government, to discuss with industry.”
Mr Forrest said that both Ms Gillard and Mr Swan were aware that a significant player in the mining industry had resolved to accept the 40 per cent RSPT provided it was mitigated by the investment in infrastructure. However, he claimed that advertising campaigns by mining majors played a significant role in their decision to abandon this proposal.
“Prime Minister Gillard and Deputy Prime Minister Swan took the decision to cease all negotiations on the infrastructure proposal, despite its advanced nature, and instead pursued a tax scheme much less attractive to the Australian public, but which promised to silence the multinationals’ advertising campaign,” he stated.
Mr Forrest said that instead of allowing deductions against new investment in common-user infrastructure, “the Treasurer chose to allow a deduction against the value of the large miners’ assets: hence the expression ‘stealing from the poor and giving to the rich’ of the secretly-crafted MRRT”. “History now records the new Deputy Prime Minister Swan and new Prime Minister Gillard chose a 22.5 per cent tax that offered those who negotiated the massive protection described above. They chose a weak, complicated and unfair tax that had no infrastructure incentives, and Australia remains an infrastructure-poor country.” Mr Forrest said that if the proposal he had been discussing with Mr Rudd was accepted, “Australia would have become more prosperous with higher general standards of living for her people”. “In my opinion, the furtherance of their own careers, as opposed to the furtherance of the economic and standard of living interest of the Australian people, was their primary motivation,” he said. Speculation that Fortescue would challenge the MRRT in the High Court was confirmed by the company’s chief executive officer Nev Power during a media teleconference on April 19. Mr Power said the company’s legal team was being briefed on the case, and he expected the challenge to be launched in the coming weeks.
WA Premier Colin Barnett has reportedly expressed support for the challenge, saying the State Government would be prepared to give evidence in the case, while Queensland Premier Campbell Newman is also said to be interested in being involved.


By Rachel Dally-Watkins

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