FORTESCUE Metals Group and junior explorers hope the Minerals Resource Rent Tax (MRRT) will be repealed if the coalition wins the federal election in September, as polls predict.
But even if it remained, the tax was so poorly designed Fortescue probably wouldn't need to pay a cent for many years, the company's chief financial officer Stephen Pearce told a Senate committee hearing in Perth on Monday.
While the iron ore miner expected to pay close to $4 billion on state royalties over the next five years, it did not anticipate needing to pay the mining tax during that period, Mr Pearce said.
If deferred state royalty credits were claimed thereafter, the company would effectively not be paying the tax for a further five years, he said.
Mr Pearce said Fortescue, which has challenged the validity of the tax in the High Court, believes the MRRT is ill conceived and overly complex.
He said it had so far cost the company $3 million to $5 million in compliance costs.
Simon Bennison, chief executive of the Association of Mining and Exploration Companies (AMEC), said the MRRT's design made it harder for small mining companies to get into production but sheltered bigger, established producers.
It was compounding the negative impact of weaker commodity prices and skyrocketing costs, sending vast numbers of mining companies to other nations, Mr Bennison said.
"It's death by 1000 cuts, of which the MRRT is a very significant cut," he said.
Exploration activity had plunged, while Australia's mines were rapidly depleting, he said.
There needed to be incentives to explore, such as a tax credit arrangement similar to Canada's flow-through shares scheme, Mr Bennison said.
"We are really going to hit a wall down the track," he said.
While the federal government had expected the tax would bring in billions of revenue, it has so far yielded only $126 million.
Senator Mathias Cormann asked the hearing: "Why have a tax that doesn't raise revenue and is costly to administer?"
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