How Does The New Budget Affect The Mining Industry

Date posted: July 25, 2014

capabilitiesWith the new budget just recently released, many are wondering how this will affect the mining industry. Many are worried about the budget cuts as spending on mining is projected to decline to $2.74 billion in the coming year, down from $3.139 billion the previous year. Some fear that the boom of the mining industry is finally dying down. Despite some negative outlooks, there are positive effects that the mining industry should experience with the recent announcement.

Positives for the Mining Industry

The mining sector is expected to benefit from the government’s promise to scrap the Mineral Resources Rent Tax (MRRT) in 2014. The government has indicated that the MRRT is considerably a failed tax, having generated minimal, yet imposing undue burden to the mining industry. In the coming year, receipts from MRRT are due to be smaller as there are more companies that will be applying for refunds. The removal of the MRRT is in line with the government’s goal of lowering taxes overall. Starting July 1, the government will set to fight for the abolition of the said tax. Also due to be abolished is the carbon tax and the mining tax.

Aside from the tax cuts, the mining industry is also geared to benefit from the government’s pledge of $100 million for the Exploration Development Incentive. This is to promote investments in small exploration firms engaged in Greenfields mineral exploration. The incentive programme provides small exploration companies with tax credit for eligible exploration work. The government is currently working on the development of the legislation for this programme.

The overall thrust is to minimise taxes and make industries, especially the mining industry, more competitive in the market. The mining industry is expected to be one of the driving forces in national economic growth. The sector is projected to contribute significantly in terms of higher revenues. The strategy is geared towards long-term growth as companies are relieved of burdensome taxes to make them more successful in international markets.

Despite some negative reactions to the budget, players in the mining industry remain positive about the outlook of the industry in the coming years. Reay Services Group, a contractor of choice in pipeline installation and reliable trenching services, is upbeat about the new developments. The move of the government to provide better tax incentives for the mining sector will help boost exploration activities in the resource-rich regions of the country. The planned lower taxes are set to benefit mining companies as well as contractors such as Reay Services Group.