A study by Synergies Economic Consulting and the Centre of Policy Studies has shown the FTS would be a worthwhile stimulus measure, generating “immediate socio-economic benefits across Australia”
These benefits could include over 4000 new jobs, $A114 million in additional gross domestic product, $191 million in additional real private consumption and $965.1 million in additional real investment.
Industry bodies across Australia, including the Association of Mining and Exploration Companies, the Australian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists, the Queensland Resources Council, the Chamber of Minerals and Energy of Western Australia, and the Australian Securities Exchange, have backed the findings of the study.
In a communique released today, the groups said exploration was bearing the brunt of the slowdown.
The statement also cited a soon-to-be-released report from the Australian Institute of Geoscientists that indicates some 53% of geoscientists could be unemployed within the next 12 months as showing the difficult conditions facing the exploration end of the mining industry.
The industry groups argue the proposed FTS scheme would allow junior explorers to pass “unusable” tax deductions on to their Australian shareholders, which would create immediate investment benefits.
Additionally, the FTS would have further benefits that were not quantified in the analysis, which included new discoveries and, in turn, new mines and increased minerals and energy production beyond the four-year timeframe of the study.
Under the proposed scheme, exploration tax credits would be available to shareholders at the Australian company tax rate of 30%, and eligible shareholders would be entitled to use their ETCs to offset their own tax liabilities.
A similar scheme has been running in Canada for several years, and today the industry groups said the scheme had been attributed with significantly increasing capital flows and net exploration and mining activity.
The Australian government committed to flow-through shares in the 2007 election, but the scheme appears to have been put on the backburner.
MiningNews.net put in a call to a representative from federal minister for mining Martin Ferguson but had not received a response at the time of publication.
AMEC chief executive officer Simon Bennison said the independent report demonstrated the significant economic, employment and social returns a flow-through share scheme would deliver.
“The fact is that regardless of the current economic turmoil, FTS is simply good policy that fixes a major shortcoming of the Australian taxation system,” he said.
“Our taxation model has always intended to allow eligible exploration expenditure to be claimed as tax deductions. The anomaly is that when an exploration company spends money exploring for minerals in the hope that they will some day mine, those tax credits go unused until there is taxable income, if ever.
“FTS will correct that asymmetry, shore up investor confidence and provide the bonus of helping to stimulate the flailing Australian economy.”
Bennison called on the Rudd government to follow through on its pre-election promise to introduce FTS as it would provide a boost to real output, employment, private consumption and investment.
Queensland Resources Council chief executive Michael Roche said the FTS scheme would increase the likelihood of quality mineral, oil and gas discoveries.
“The bottom line is that exploration companies spend a lot of money to find resource deposits,” Roche said.
“With the vast majority of junior explorers without an alternative income stream, the absence of immediate tax deductions for exploration simply pushes costs higher, resulting in lower levels of activity and fewer substantive new discoveries and new projects.”
