NZ targets $30m extra tax from mining tax changes
The government's enthusiasm for mining does not run to leaving " very concessionary" tax treatment rules for company expenses in place, with Revenue Minister Peter Dunne tabling new legislation to raise around $30 million a year in extra tax from miners.
A regulatory impact statement accompanying the new legislation, tabled in Parliament this afternoon, shows the mining industry is concerned the decision will make New Zealand less attractive to international mining investors.
However, an analyst with the mining lobbyist Straterra, Bernie Napp, welcomed the government's decision to allow accumulated tax losses to be carried over when a mining operation changes ownership.
Most other companies lose access to accumulated tax losses, which can be offset against future income, during an ownership change.
The ongoing concession to miners appears to recognise that many prospects are worked up and then sold to companies with the necessary expertise and capital to develop the mine.
The proposals relate to some 200 New Zealand companies in the gold, silver and ironsands, and could be expected to have an impact on new would-be offshore miners such as Chatham Rock Phosphate, which will be the first company to seek a mining licence under new rules governing mining in New Zealand's 200-mile exclusive economic zone.
The argument for changing mining's special treatment is the same as that mounted for other sectors over recent decades: that a low rate, broad-based tax system, which treats investments equally, is preferable to a more complex, concessionary tax system, which may lead to higher tax rates being applied across the economy as a whole.
The Inland Revenue Department says it considers "sector-specific rules will provide a more orthodox tax treatment to the sector (by removing the concessionary treatment), while still providing certainty and catering for some distinctive features of the sector".
In particular, officials have accepted that spending on a mine falls into several phases: prospecting, exploration, development, mining, and rehabilitation.
The new rules will also require expenditure to deducted over the "life of the mine", with special treatments allowed to deal with the fact that a mine's working life can be uncertain when mining begins. A mine will have a maximum life for expenditure deductibility and depreciation purposes of 25 years.
The mining industry argued officials misunderstood the arguments about capital allocation. The question was not whether investment funds went to mining or another New Zealand industry, but whether funds available for mining were invested here or elsewhere, Mr Napp says.
However, the IRD concluded that "even if tax settings are a consideration when investing into a certain jurisdiction, they will - provided the rules are not actively discriminatory - be relatively insignificant compared to other factors".