This session examines Fortescue Metals Group Ltd v The Commonwealth [2013] HCA 34; (2013) 250 CLR 548, the Mining Tax Case, in which a unanimous six‑member Court (French CJ, Hayne, Crennan, Kiefel, Bell and Keane JJ) upheld the validity of the Minerals Resource Rent Tax (‘’MRRT’’).
The plaintiffs challenged the Minerals Resource Rent Tax Act 2012 (Cth) on the basis that since the MRRT allowed miners an allowance for State mining royalties actually paid, its burden could vary from State to State.
On that footing the plaintiffs argued, amongst other things, that the legislation discriminated between States contrary to s 51(ii) of the Constitution and gave preference to one State over another contrary to s 99. Every ground failed.
The interest of the case for us lies not in the result necessarily, but in a sharp disagreement beneath a unanimous outcome about what “discrimination” in s 51(ii) actually means: is it a formal question (does the law, in its terms, draw a distinction between States?) or a substantive one (does the law’s practical operation work an unjustified inequality, tested by whether the distinction is “appropriate and adapted to a proper objective”?).
Case Summary
The MRRT taxed “mining profit” from iron ore and coal at an effective rate of 22.5%, allowing as a deduction (a “royalty allowance”) State mining royalties incurred. The plaintiffs’ core proposition was that, because royalties differ between States, the MRRT was “effectively” levied at different rates in different States.
The Court rejected the premise: the royalties were merely offset in arriving at the tax base, and what remained above the threshold was taxed at the same rate everywhere. In other words, any difference in outcome flowed from the differing State royalty regimes, not from any distinction drawn by the Commonwealth law.
Discussion Focus
The test for “discrimination” under s 51(ii) – Should a “formal’’ or ‘’substantial’’ approach be taken to the issue of discrimination? Compare the plurality’s position at [105], [114] and [115]–[116] with French CJ’s position at [5]; and see [22], [31], [49]–[50]. Note Crennan J’s position also at [155] and [162], and Kiefel J’s position at [199] and [202].
Legal operation versus practical operation – can a uniform law with unequal effects discriminate? Note the comments of the plurality at [107], [117], Kiefel at [225], Crennan J at [174] and French CJ at [34]–[35].
The Barger “converse case” – is this the plaintiffs’ best argument? In R v Barger (1908) 6 CLR 41 the Court described a prohibited “converse case”: a federal tax varying in inverse proportion to State exactions so as to equalise the overall burden.
The plaintiffs said the MRRT, being a royalty allowance rising as State royalty rises, was exactly that, yet every judgment rejected the analogy on the same ground that any equalising is worked by State law, not by the Act.
See the comments at [214]–[215], [221]–[222] (Kiefel J), [88], [90]–[91] (Plurality).
Federalism, Engineers and s 109 – how important is the structural argument that the validity of a federal law should not be based on State taxation regimes? See the plurality at [118]–[121] and Kiefel at [217].
Required Reading:
Fortescue Metals Group Limited v The Commonwealth | High Court of Australia
Constitution – Federal Register of Legislation
Discussion led by Richard Lyons