Mining royalties plan to net $1b
Quarantining one-quarter of all WA mining royalties from the annual GST distribution would deliver almost $1 billion to WA over four years, under modelling by the State Government.
Barely two weeks after Australia’s chief mining lobby called for 25 per cent of WA’s mineral royalty income to be exempt from GST calculations, Premier Mark McGowan revealed he was looking at the proposal.
Treasury modelling showed the plan would yield $5.4 billion in extra money for WA over the next four years.
The figure is almost $1 billion more than the $4.6 billion that would be raised by quarantining just iron ore royalties, as proposed by Mr McGowan.
The Minerals Council of Australia has called for 25 per cent of all WA mining royalties to be set aside from the Commonwealth Grants Commission’s GST determination.
The expanded royalty exemption would form part of the State’s submission to a Federal review of the GST grants formula being carried out by the Productivity Commission.
Mr McGowan said that while the State would be satisfied with an exemption for iron ore — which is by far WA’s most lucrative export — the MCA proposal would also be pursued.
“As stated before, it has been iron ore that has driven the unprecedented distortion in the GST distributions and that’s why we see a 25 per cent discount on iron ore revenue as a good first step for WA,” he said.
“Of course, the MCA suggestion will deliver even more funding back to WA, and this is something that we could work towards.”
According to Mr McGowan, the GST distribution system provided a perverse incentive for other States to block mineral development because they derived much of the benefit from WA’s projects.
He said quarantining a portion of royalties, a model that applied in Canada, was a focus because it was “an achievable and reasonable option that can be implemented quickly”.
“No other revenue source has come anywhere near iron ore when it comes to distorting the carve-up of Commonwealth payments,” Mr McGowan said.
“Why shouldn’t Western Australians be assured of at least 25 per cent of the revenue from the iron ore projects staying in our State? As it stands, if a State improves its economy through better investment, the benefits are effectively transferred to the other States.”
Under the latest distribution, WA will get back just 34¢ for every dollar of GST it generates.
Quarantining a portion of mining royalties was a focus, Premier Mark McGowan says.