Brendon Grylls wants to impose a $5 per tonne mining tax on iron ore giants BHP Billiton and Rio Tinto – a policy he will sell as being a solution to the State’s Budget problems.
The proposal, which would be bitterly fought by the big miners, is said to be at the heart of Mr Grylls’ tilt at Terry Redman’s leadership of the WA Nationals.
It is understood Mr Grylls approached Mr Redman about adopting his mining tax plan, but Mr Redman rejected it, precipitating the leadership challenge.The West Australian believes Mr Grylls will prevail at a special party room meeting on Monday.
His backers are confident they have eight of the partyroom’s 12 votes.
According to people with knowledge of the plan, the $5-a-tonne tax, or production levy, would only apply to BHP Billiton and Rio Tinto, not Andrew Forrest’s Fortescue Metals Group or smaller miners.
The rationale for this is said to be that the Big Two have advantages of incumbency and favourable legacy State Agreements, which contributes to their being able to produce iron ore at a lower cash cost that their competitors.
Mr Grylls is also likely to argue that the Big Two have made billions of dollars of windfall profits in WA over the past decade.
Brendon Grylls and Terry Redman. Picture: Lauren Celenza
Based on annual iron ore production by the Big Two of about 550 million tonnes, a $5-a-tonne levy could be expected to raise about $2.75 billion.
WA’s Budget deficit presently stands at $.3.9 billion for 2016-17 and a projected $1.9 billion for 2017-18.
But mining revenues also interact with the Commonwealth Grants Commission’s carve-up of the national GST pool, meaning that about 90 per cent of any extra mining revenue raised by the tax slug would eventually be redistributed to other States over the medium term.
Advocating a new mining tax would be a high-risk move that would be certain to be opposed by the miners and would probably be opposed by Premier Colin Barnett, who declined to comment on the plan, saying only that the leadership question was a matter for the Nationals.
With iron ore prices well down on their peak, thousands of jobs have already been shed by Pilbara miners, and it would be argued that a new tax would harm jobs further.
The proposed tax would apply only to Rio Tinto and BHP. Picture: The West Australian
Some Grylls backers in the Nationals party room believe the Liberal-National Government is in danger of losing the next State election and that bringing their former leader back to the top job boosts their chances of retaining government, and critically, the Royalties for Regions program.
Mr Redman declined to comment and Mr Grylls could not be reached for comment.
If Mr Grylls does indeed prevail on Monday, there is also the question of what will happen to the Nationals’ Cabinet make-up.
Mr Redman, who is highly regarded by the Liberals, could lose the leadership but still be retained by Mr Grylls as one of three Nationals ministers.
In that scenario, Racing and Gaming Minister Colin Holt could be forced out, as Nationals deputy leader Mia Davies is certain to retain her position.