Resources royalties can be State Government revenue raiser

THE Queensland Government could raise much-needed revenue by revamping the way it collects resources royalties from miners, according to a QUT economist. 

Dr David Willis, from QUT Business School, said with the State Government preparing to hand down its first budget in July, it must focus on ways to raise revenue.

"While the options available are limited, the government must relook at the income it recovers from miners and gas producers throughout the state to find the best value for Queenslanders," he said.

"Currently the royalties system is based on the price of a tonne of coal or iron ore. But this is clearly deficient given the miners' strategy of overproducing and oversupplying the market to force prices down to artificially low levels.

"Larger miners with larger shares of the coal, gas and iron ore markets employ this strategy to try to maximise production and market share and at the same time pay less in royalties.

"We are presently running record production numbers but getting record low prices. This suits the big miners but not the state or country. It is hurting Queensland and depriving the government of revenue it needs to fund services."

Dr Willis said an overhaul of the royalty system was a better strategy than simply raising royalties.

"While not advocating raising the royalties level, although there is a case for it, it makes more economic sense to look at a two-tier system for managing this important revenue stream," he said.

"Queensland and the other states need to look at royalties based on an average tonnage shipped as well as royalties per price, with the miners paying whichever is higher at the time.

"Therefore, whatever miners produce past a certain price point, they pay for based on tonnage. This allows for slumps in commodity prices and puts a valuable floor under royalties revenue that doesn't currently exist.

"So if, as is occurring now, miners are overproducing on to a falling demand market, Queenslanders would not be the ones to take the financial hit."

www.qut.edu.au

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