A constitutional challenge to the new federal mining tax by mining magnate Mr Andrew Forrest is highly likely to fail, according to a Charles Sturt University (CSU) constitutional law expert.

 

Fortescue Metals CEO, Mr Andrew Forrest, indicated that he may challenge the new Minerals Resource Rent Tax (MRRT) on the grounds that it is unconstitutional, with Western Australian Premier Mr Colin Barnett indicating that the WA government would join such a challenge.

 

Dr Bede Harris, from CSU’s Faculty of Business, said it is highly doubtful that such a challenge would succeed on any of the grounds that have been mooted.

 

“Some have argued that because of the right to extract minerals, the tax contravenes Section 114 of the Australian Constitution, which prohibits the Commonwealth and the States from taxing each other’s property,” said Dr Harris, who is based at CSU in Albury-Wodonga. 

 

“But that section is not relevant here. Even if one accepts that minerals under the ground belong to the States, who then charge a royalty for the right to extract them, the MRRT legislation does not tax the minerals in the hands of the States – it taxes the profit made by companies after they have mined them. 

 

“So the tax is not imposed on the States and it isn’t imposed on the minerals as assets – it is a tax on the profits made by companies which mine them, not on the actual extracted minerals.”

 

Dr Harris said the other ground for challenge on which there has been speculation is that the tax infringes Section 99 of the Constitution, which prohibits the Commonwealth from imposing taxes in a way that discriminates between States.

 

“A High Court decision that has been followed since 1923 indicates this also has not been breached.