Submission to the Victorian Government's regulatory impact statement on imposing royalties on gold

The proposed gold royalty is fundamentally flawed and requires urgent reform to reduce unintended impacts on regional Victorian mines, supporting businesses and communities.

MCA Victoria does not oppose the introduction of a carefully considered gold royalty that is fit for purpose for Victoria. MCA Victoria does oppose the proposed royalty as it constitutes a large new tax on a regional industry without consultation and without warning.

The royalty must be redesigned after a proper consultation process. MCA Victoria has put forward modest reforms to the royalty. These reforms raise revenue while minimising the unintended consequences and risks posed by the proposed royalty to this regional industry.

As currently proposed, the gold royalty will not meet the government’s own objective of securing a sustainable revenue source to benefit the community.

Victoria’s mining industry seeks a fair and transparent consultation process. The royalty has been rushed and poorly designed. The MCA seeks a delay in the implementation of the royalty and a withdrawal of the regulation until after a comprehensive consultation process in 2020.

The policy making process is an example of very poor process leading to flawed policy which will impact regional jobs and industry. A one month consultation period as part of the RIS process is inadequate. The royalty was announced in the Budget with no consultation.

Very limited opportunity has been provided for MCA Victoria to provide comments back to the government since the Budget announcement. Detail on the information provided to the government by the industry on the impacts of the royalty and modest proposals to reform the flaws in the announced royalty are not reflected or even acknowledged in the RIS.

All states have different gold royalty regimes tailored to their gold industries. Most states tax gold at a lower rate than other commodities. This reflects the fact that gold involves more costs in mining and processing and gold is often more marginal business than other minerals.

The government’s proposed royalty rate is higher than Western Australia’s - the biggest gold mining state. It is a tax designed for a potentially one off gold price. It is not designed with Victoria’s unique geological characteristics, operating environment or understanding of the gold market and will therefore not prove to be an enduring tax reform.

Imposing a large new tax on each of Victoria’s four gold mines with little notice will have an impact. It is nonsense that the RIS’s flawed modelling attempts to claim otherwise. The flaws in the RIS cast doubt on the credibility and findings of the analysis and the RIS process.

Independent analysis of the RIS finds that the ‘quantitative assessment contain errors of both fact and logic’, and that the ‘royalty is more likely than not to have an effect on the level of activity in the sector, the total economic costs are likely to exceed benefits.’ Further, the ‘Imposition of a royalty in the proposed form poses a significant risk of forcing gold producers with higher production costs out of business. Exit of these companies would create adverse effects for the local economy, likely offsetting the net benefit of transfer of profits to government revenues.’

It is important to note that although smaller gold mines account for only 23 percent of overall state production, they employ about 50 percent of all gold mine workers in the State.

Reform of all fees and charges on exploration and resources projects, as proposed by the government in 2020, must go hand in hand with proper consideration of the new royalty.

Regional Victorian workers, small businesses supplying goods and services, and local communities benefit from Victoria’s gold mines. Without reform of the gold royalty structure, this is put at risk. A fair and genuine consultation process is critical.

 

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