The West

The Gillard Government's new mining tax could be torn down by the High Court, denying the Prime Minister billions of dollars in revenue and wrecking her reform agenda for the next three years, previously secret Treasury documents have revealed.

Almost 100 documents released to The West Australian under Freedom of Information laws, including 300 pages of confidential emails, letters and briefing papers between Treasurer Wayne Swan and senior bureaucrats, expose a Government under siege as attacks over the resources super profits tax and its successor, the mineral resources rent tax, grew more ferocious.

The advice included a warning in June from Government solicitors to Mr Swan that the super profits tax could be found to be unconstitutional if just one State changed a royalty rate.

The same argument applies to the proposed mineral resources tax, which throws $10 billion in anticipated revenue into doubt.

The Government's plan to lift the superannuation guarantee, cut the company tax rate, establish a regional infrastructure fund and deliver small business tax breaks are all predicated on the mining tax revenue offsetting the increased costs.

"Australian Government Solicitors have advised . . . the RSPT would risk being unconstitutional on the grounds that the RSPT would have the potential to discriminate between . . . States or parts of a State," Mr Swan was advised in June.

WA Liberal frontbencher Mathias Cormann said the documents exposed why the Government wanted to cover up the details of the mining tax.

"We have always queried the constitutionality of this new national tax on mining," Senator Cormann said. "Turns out so did the Government's own internal legal advisers," he said.

WA Chamber of Commerce and Industry chief economist John Nicolaou said all information about the tax should be released in light of the documents.

"The further uncertainty this information creates confirms our view that the Government needs to rethink the tax and include it as part of a broader discussion on tax reform at its proposed tax summit next year," he said.

Australia's third biggest iron ore miner, Fortescue Metals Group, released a statement saying the company had long considered the mining tax unconstitutional.

Briefing papers show also that on the day Julia Gillard and Mr Swan released the details of the mineral resources tax, Treasury warned that a key element of the new tax - allowing companies to use the market value of their assets as the starting base of the tax - could be "gamed" by the mining giants.

Treasury's chief business tax adviser Andrew England warned this approach, supported by BHP Billiton, Xstrata and Rio Tinto, would pose "significant risks for the integrity of the MRRT" because companies would inflate the value of their assets to reduce the tax they paid.

Read the mining tax documents

Mining versus Government

Constitutional issues

Wa Royalty increases

Wesfarmers and FMG

Email to Wayne Swan

The West Australian

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