The Chamber of Minerals and Energy of Western Australia (CME) today criticised a decision by the State Government to increase gold royalties, saying the move is disappointing and shortsighted.
The State Government today announced a tiered royalty rate for gold will be introduced from 1 January 2018, whereby an increased rate of 3.75 per cent will apply on the full royalty rate when the price is above A$1,200 per ounce. When the gold price is $A1,200 per ounce or less, the current 2.5 per cent rate will apply.
In addition, from 1 July 2018, the State Government will remove the current exemption for the first 2,500 ounces of gold production for miners who produce more than that amount in a financial year.
CME Acting Chief Executive Nicole Roocke said the decision would have a devastating impact on the State’s gold sector, which may be forced to close mines and cut jobs.
“To introduce such austere measures at a time when the gold sector is just experiencing an improvement in production and sales is unjustified, especially when the majority of royalties raised from this increase will eventually be redistributed to other states through GST after four years,” Ms Roocke said.
“Gold companies are a significant contributor to WA Government by way of royalties and account for about $238 million, or 5 per cent, of total resources industry royalties.
“The gold sector employs 25,000 people – around 23 per cent of the total WA mining industry workforce – and many of these jobs may now be put at risk due to this royalty increase.
“The Government should be encouraging investment in the sector, given its positive flow-on effect in job creation and economic growth, not hampering it with higher royalties and taxes.
“What is particularly disappointing about today’s announcement is that the Labor Party is on the record in saying that any increase to gold royalties would have a negative impact due to the marginal nature of the industry.
“Gold companies, who have only recently starting expanding and constructing new mines, will feel betrayed by this decision and concerned about the future of the industry.
“CME will be strongly opposing this increase in gold royalties on behalf of our members as it will have long-term consequences for the resources industry and the WA economy as a whole.”
Ms Roocke said some gold companies would face a double-hit, with the State Government also announcing a new payroll tax scale from 1 July 2018. The scheme will see employers with Australia-wide payrolls between $100 million and $1.5 billion taxed at a marginal rate of 6.5 per cent.
“For some gold companies, the prospect of paying higher royalties and payroll tax could be crippling,” she said.
“The resources sector is the main target of this new payroll tax, with iron ore companies bearing the brunt and contributing one fifth of the total additional revenue generated from the levy, expected to be $435 million over the forward estimates.
“Today’s Budget is bad news for the resources sector and not reflective of the contribution it makes to WA, which amount to $5.2 billion in royalties in 2016-17.
“The Treasurer himself stated in his Budget speech that the recent positive growth of the WA economy was underpinned by the expansion in iron ore and LNG projects, which created significant demand for labour and contributed to a rise in employment and wages.
“It doesn’t make sense to jeopardize the continued growth of the WA economy by imposing higher fees, taxes and royalties on the sector which is largely behind the State’s remarkable change in economic fortunes.”
Ms Roocke said the sector had already been contributing to budget repair since 1 July 2017 through increases in port fees, the Mine Safety Levy and Annual Mining Tenement Rents.