Mining tax unsustainable, says Oakeshott

The federal independent MP Rob Oakeshott has declared the mining tax "unsustainable" and said unless the federal and state governments sort out the dispute over royalties, the tax must be brought back to Parliament and amended.

Mr Oakeshott described as a "complete waste of time" a lengthy meeting with Treasury officials in Sydney on Tuesday which he requested following reports the mining tax, which began on July 1, made little or no revenue in its first three months of operation.

It is understood Treasury would give him no figures on how much the tax had actually made or was expected to make, citing privacy concerns because only a handful of companies were liable for the tax.

Mr Oakeshott has complained that a loophole which allows miners to deduct from their mining tax liability the royalties they pay to states needs to be closed. The Greens are of the same view because the loophole has become an open invitation to the states to keep raising royalties and gouging the mining tax proceeds.

The Treasurer, Wayne Swan, says the review of how the GST revenue is distributed to the states, which is due to be released in the next four to six weeks, would advise on how to penalise states financially if they increased royalties.

But Mr Oakeshott believes this is an impractical approach, and he forecast state-federal relations were about to implode.

"Commonwealth-state relations are going to be tested to the max," he told Fairfax Media.

Mr Oakeshott said that unless an accommodation could be reached regarding royalties, the mining tax needed to be amended.

"It is unsustainable the way it is," he said. "If they can't resolve it, Parliament will have to."

The Greens recently released economic modelling showing the tax would make an extra $26 billion over four years if some of the changes made after Kevin Rudd was dumped as leader and the tax renegotiated, were undone.

The Greens have a bill before Parliament trying to close the royalties loophole, which the modelling showed cost $2.2 billion in lost federal revenue.

The mid-year budget update estimated the tax would make $9.1 billion in its first four years and the Finance Minister, Penny Wong, said on Tuesday that this estimate already factored in the impact of known royalty increases.

Also on Tuesday, the government and Opposition rejected claims by Mr Oakeshott that he had been secretly assured by both sides they would revisit the GST after the election.

This story Mining tax unsustainable, says Oakeshott first appeared on The Sydney Morning Herald.