An unpopular proposal to increase mining-sector royalties and
taxes has been formally watered down, with the Government
saying yesterday any royalty changes would only affect new
entrants to the sector.
Royalties from existing
operations, such as East Otago's Oceana Gold or Newmont Waihi
Gold in the central North Island, would not be affected, but
may yet be affected by tax changes.
The proposed increases sparked disbelief and outspoken
criticism by Oceana and Newmont - the country's two largest
gold producers - during the New Zealand branch annual
conference of the Australian Institute of Mining &
Metallurgy in Rotorua in August.
Minister of Energy and Resources Phil Heatley warned the
conference delegates in August parts of the proposals were
"not perfect" for them, prompting ministry officials to
hurriedly pass on quiet assurances to senior mining
executives that the proposals would not affect current
With no firm details then, comparisons were being made with
Australian Prime Minister Julia Gillard's ill-fated proposal
for a 40% mining industry tax hitting thousands of companies.
The Federal Government was forced into major concessions in
July, including a drop to 30% and covering only iron ore and
coal companies - estimated to have cost $A1.5 billion
($NZ1.89 billion) in lost tax revenue.
The Reviewing the Royalties Regime for Minerals paper
outlines proposals on Government revenue from minerals, but
not oil and gas, while the Taxation of Specified Mineral
Mining paper also excludes oil and gas from its proposals,
Oceana's chief executive, Mick Wilkes, criticised Mr Heatley
in August, warning him of killing the goose laying golden
eggs, while Newmont's general manager, Glen Grindlay,
threatened to quit multimillion-dollar exploration spending
until the issue was resolved.
The delegates and executives were riled their tax and royalty
contribution could be rising when the National-led Government
has for two years been trumpeting the mining sector could
underpin economic recovery.
Mining costs had increased more than any gains in gold
prices, putting the viability of many mines under increased
Mr Heatley yesterday reiterated the importance of the mineral
sector's contribution to the economy, saying the public
understood royalties and tax paid for hospitals, school and
"There is real potential for that contribution to grow," he
"The royalties review recommends higher royalty rates for
large and highly profitable mining operations."
However, the new rates would only apply to new permits.
Existing permits and licences would retain the royalty rate
that currently applies," Mr Heatley said in a statement
On the tax paper, Revenue Minister Peter Dunne said it was
important mining companies paid an appropriate level of tax.
The tax paper looks at rules which apply to miners of
specified minerals, including gold, silver and ironsands.
Mr Dunne said the tax paper suggested more closely aligning
the current concessionary tax regime for "certain minerals"
with general tax principles which applied to other forms of
Specifically, the review suggests removing immediate tax
deductions, or in some cases tax deductions in advance, for
expenditure which would normally be capitalised and
depreciated over the useful life of the asset, he said.
"The mining sector is important but we must ensure that the
tax rules do not give the sector an unfair advantage over
other investments which may have higher pre-tax rates of
return," Mr Dunne said.
Consultation closes on December 7.