High Court told MRRT unconstitutional

Fortescue Metals Group's challenge to the mining tax is set to go ahead before the full High Court.

Fortescue Metals Group will appear before the High Court to challenge the government's mining tax. Source: AAP

A LAWYER for mining magnate Andrew "Twiggy" Forrest says the federal government's mining tax breaches the constitution and nothing can be done to bring it back from the dead.

"It is not revived or quickened by being put through the crematorium of this court," counsel for the Fortescue Metals Group, David Jackson QC, told High Court judges on Wednesday.

Mr Forrest wasn't in court for the start of the case that pits his Fortescue Metals Group against the Commonwealth of Australia over the validity of the Minerals Resources Rent Tax (MRRT).

The full court of the High Court, sitting in Canberra, has set down three days to hear the case.

At one point, Justice Kenneth Hayne observed: "Nothing is unduly simple in this."

Mr Forrest has vigorously opposed the MRRT from the outset.

He foreshadowed a legal challenge last year - long before the government revealed just how little the MRRT raised in its first six months.

To the end of December 2012, the tax garnered $126 million from miners against a full-year forecast of $2 billion.

Fortescue expects to pay no MRRT this year.

Opening the case, Mr Jackson said Fortescue did not dispute the commonwealth's power to raise tax.

But the company was challenging the validity of the MRRT on grounds that it contravened a provision of the constitution which stipulates tax must be applied equally to all states.

"It discriminates against the states in that it gives rise to a preference to some states," Mr Jackson said.

He argued the MRRT was levied differently in each state because of the variation in mining royalties which are offset against tax liabilities.

The commonwealth, represented by Solicitor-General Justin Gleeson, has yet to present its case.

But it will argue the tax is constitutional because it is imposed at a uniform rate regardless of a mine's location.

Royalties were deemed merely one type of allowance for which a miner can calculate deductions in calculating MRRT liability.

The MRRT is levied at the rate of 22.5 per cent on total profits over $75 million derived from extraction of iron ore, coal and coal-seam gas.

Mining companies can reduce MRRT liability through claiming certain expenditure including royalty payments to state governments.

The case has attracted considerable interest with the solicitors-general for Queensland and Western Australia granted leave to intervene.

It's being heard by six of the court's seven judges after Justice Stephen Gageler excused himself on grounds that he provided legal advice to the commonwealth on the MRRT when he was solicitor-general.

The case is expected to run for another two days.

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