FORTESCUE METALS GROUP LTD & ORS v THE COMMONWEALTH OF AUSTRALIA

Judges: French CJ
Hayne J
Crennan J

Kiefel J
Bell J
Keane J
French CJ [2nd]

Court:
Full High Court

MEDIA NEUTRAL CITATION: [2013] HCA 34

Judgment date: 7 August 2013

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Kiefel J.

177. The second to fifth plaintiffs are subsidiaries of the first plaintiff and the holders of registered mining leases for iron ore granted under s 71 of the Mining Act 1978 (WA). They are obliged to pay royalties to the Crown in right of the State of Western Australia at the rate prescribed by reg 86 of the Mining Regulations 1981 (WA) made pursuant to ss 109 and 162(1) of the Mining Act .

178. Section 3(1) in each of the Minerals Resource Rent Tax (Imposition - Customs) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition - Excise) Act 2012 (Cth) and the Minerals Resource Rent Tax (Imposition - General) Act 2012 (Cth) (collectively " the Imposition Acts " ) imposes a minerals resource rent tax ( " MRRT " ), the liability for which is calculated under the Minerals Resource Rent Tax Act 2012 (Cth) ( " the MRRT Act " ). In these reasons, " the MRRT legislation " refers to the Imposition Acts and the MRRT Act together.

179. The calculation of MRRT is based upon " above normal profits " made on a miner ' s mining project interests ^[284] Minerals Resource Rent Tax Act 2012 (Cth), ss 1-10, 10-1. . The term " above normal profits " is not defined in the MRRT Act , but it may be inferred from the " low profit offsets " , for which the Act provides ^[285] Minerals Resource Rent Tax Act 2012, ss 45-5, 45-10. , that profits are above normal when the sum of profits of each mining project interest of the miner and its related entities is more than $ 75 million.

180. The calculation of MRRT liability ^[286] Minerals Resource Rent Tax Act 2012, s 10-5. involves the deduction of " MRRT allowances " ^[287] Minerals Resource Rent Tax Act 2012, Ch 3. from a miner ' s mining profits before the MRRT rate is applied. The MRRT allowances include a royalty allowance ^[288] Minerals Resource Rent Tax Act 2012, s 10-10. . The effect of the royalty allowance is that full credit is given to a miner for the amount of any mining royalties paid to the Commonwealth, a State or a Territory ^[289] See the note to s 60-25(1) of the Minerals Resource Rent Tax Act 2012. for the mining of certain resources ^[290] Minerals Resource Rent Tax Act 2012, s 20-5. . The central feature of the MRRT legislation, so far as concerns the plaintiffs ' claims, is the allowance made for mining royalties incurred by a miner.

181. The mining royalties payable by a miner in respect of the mining of iron ore vary from State to State. The combined effect of full credit being given for the amount paid by a miner for mining royalties and the variation in the rate of royalties as between States, all other things being equal, is that miners in some States will pay more by way of MRRT. A miner in a State which imposes a lower rate of mining royalties pays more to the Commonwealth by way of MRRT than a miner in a State which imposes a higher rate of mining royalties. If a State increases mining royalties, miners there will pay less MRRT.

182. The States have the capacity to alter the applicable rate of mining royalties. Although there is little evidence of it having occurred, it is at least possible that a State may reduce its rate of royalty or make other concessions to the amount of mining royalties payable in order to encourage mining and the construction of infrastructure associated with it. If a State reduces mining royalties, miners there will pay more MRRT.

The plaintiffs ' claims

183. The plaintiffs ' principal claim is that MRRT, as calculated under the MRRT Act and imposed by the Imposition Acts , offends s 51(ii) of the Constitution ^[291] Section 51(ii) provides: “ The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to … taxation; but so as not to discriminate between States or parts of States ” . , the words of which contain a positive prohibition that a law with respect to taxation not discriminate between the States ^[292] New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 127 [ 219 ] - [ 220 ] ; [ 2006 ] HCA 52 . . There is no dispute that s 3(1) of each of the Imposition Acts is a law with respect to taxation. The plaintiffs also contend that the MRRT legislation gives preference to one State over another, in contravention of s 99 of the Constitution ^[293] Section 99 provides: “ The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof. ” . This question is essentially the same as that arising under s 51(ii) ^[294] See R v Barger (1908) 6 CLR 41 at 107 per Isaacs J; [ 1908 ] HCA 43 . .

184. The plaintiffs seek to apply the Melbourne Corporation doctrine ^[295] After Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 ; [ 1947 ] HCA 26 . . The plaintiffs allege that the MRRT legislation has the effect of detracting from, impairing or curtailing the ability of a State to differentiate itself from other States by determining an applicable rate of mining royalties. Any reduction a State makes simply results in an increase in MRRT payable by a miner. This is alleged to affect the capacity of a State to function as a government with sovereign control over its territory and the economic development of its natural resources.

185. The abovementioned effect, of an increase in the amount of MRRT payable by a miner, which results where a State reduces its rate of mining royalties or exempts a miner

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from paying them, is also said to detract from, impair or curtail a State in granting aid to mining contrary to the terms of s 91 of the Constitution ^[296] Section 91 provides: “ Nothing in this Constitution prohibits a State from granting any aid to or bounty on mining for gold, silver, or other metals, nor from granting, with the consent of both Houses of the Parliament of the Commonwealth expressed by resolution, any aid to or bounty on the production or export of goods. ” .

The s 51(ii) issue

186. The conclusion for which the plaintiffs contend is that the MRRT legislation discriminates between the States contrary to s 51(ii). It discriminates because the amount of MRRT paid by a miner varies according to the State in which the miner has its mining interests and according to the State to which it pays mining royalties. It may be noted at the outset that the amount of MRRT payable will vary according to a number of factors provided for in the MRRT Act , in the nature of items of expenditure and other allowances.

187. The plaintiffs ' argument is said to rely upon the " structural " aspects of the MRRT Act . Those aspects of the MRRT Act which the plaintiffs identify as relevant and significant are that: mining royalties are expressly excluded as items of expenditure; full credit is given for mining royalties by way of allowance; and the amount paid by way of mining royalties is a critical element of the calculation of a miner ' s ultimate MRRT liability. An understanding of the workings of the MRRT Act is therefore necessary to a consideration of the plaintiffs ' argument.

The calculation of MRRT

188. By s 10-1 of the MRRT Act , a miner is liable to pay MRRT, for an MRRT year ^[297] Defined as each financial year starting on or after 1 July 2012: Minerals Resource Rent Tax Act 2012, ss 10-25, 300-1. , equal to the sum of its MRRT liabilities for each of its mining project interests ^[298] Minerals Resource Rent Tax Act 2012, ss 15-5, 300-1. for that year. The formula provided by s 10-5 for calculating a miner ' s MRRT liability for a mining project interest in an MRRT year is:

MRRT liability = MRRT rate × (Mining profit − MRRT allowances).

189. The MRRT rate is the rate of taxation at which a miner will be assessed with respect to its mining profits. The effective rate, given by the formula set out in s 4 in each of the Imposition Acts , is 22.5 per cent.

190. Mining profits are dealt with in Pt 2-3 of the MRRT Act . In general terms, a miner ' s mining profit is the excess of its mining revenue over mining expenditure for the year ^[299] Minerals Resource Rent Tax Act 2012, s 25-1. . Certain expenses are excluded from mining expenditure ^[300] Minerals Resource Rent Tax Act 2012, Pt 2-3, Div 35, subdiv 35-B. in the calculation of mining profit. Mining royalties are an item of " excluded expenditure " ^[301] Minerals Resource Rent Tax Act 2012, s 35-40. . Other excluded expenditure includes items such as financing costs ^[302] Minerals Resource Rent Tax Act 2012, s 35-50. , payments under hire purchase agreements ^[303] Minerals Resource Rent Tax Act 2012, s 35-55. and the cost of acquiring rights and interests in projects ^[304] Minerals Resource Rent Tax Act 2012, s 35-35. .

191. Mining royalties are then included amongst the MRRT allowances which are to be deducted from the figure for mining profit. Royalty allowances appear as item 1 in the order of the allowances which are to be applied in the calculation of MRRT liability ^[305] Minerals Resource Rent Tax Act 2012, s 10-10. . Other allowances include pre-mining and mining loss allowances, a starting base allowance, and transferred pre-mining and mining loss allowances.

192. Chapter 3 deals with MRRT allowances and Pt 3-1, Div 60 with royalty allowances. As a guide to Div 60, it is said that " [ m ] ining royalties paid to the Commonwealth, States and Territories reduce a miner ' s MRRT liabilities for a mining project interest " ^[306] Minerals Resource Rent Tax Act 2012, s 60-1. . The stated objects of the Division, by s 60-5, include reducing " a miner ' s MRRT liability relating to profits relating to taxable resources, to the extent those taxable resources are subject to Commonwealth, State and Territory royalties " . A " mining royalty " is defined ^[307] Minerals Resource Rent Tax Act 2012, ss 35-45(1), 300-1. as expenditure made under a Commonwealth, State or Territory law in relation to a taxable resource extracted under authority of a production right.

193. A miner has a royalty allowance for a mining project interest if the miner has a mining profit for that interest for the year and one or more " royalty credits " relating to the interest ^[308] Minerals Resource Rent Tax Act 2012, ss 60-10, 300-1. . A royalty credit arises when a miner incurs a liability, inter alia, by way of a mining royalty ^[309] Minerals Resource Rent Tax Act 2012, s 60-20(1)(a). . A royalty credit may be transferred to the miner ' s other mining project interests and may be used in subsequent years ^[310] Minerals Resource Rent Tax Act 2012, s 60-25(2). .

194. Section 60-25 explains how a royalty credit is calculated. The amount is determined first by reference to the liability incurred for mining royalties. That liability is then divided by the MRRT rate. In the example given in the section, where a miner pays to a State mining royalties of $ 22.5 million in an MRRT year, the royalty credit is:

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$ 22.5 million
MRRT rate [ 22.5 per cent ]	= $ 100 million.

195. In summary, for every $ 22.5 million paid by a miner by way of mining royalties, a credit of $ 100 million is given. The royalty credit will thus be 4.4 recurring times each dollar paid, or otherwise incurred, by way of State mining royalties. As the note to s 60-25(1) says, the calculation " grosses-up the royalty payment to an amount that will reduce the ultimate MRRT liability by the amount of the royalty payment " . The plaintiffs ' argument does not depend upon the provisions which have the effect of grossing up mining royalties. Their argument is the same regardless of those provisions. It centres upon full credit being given for mining royalties actually paid or incurred.

196. A miner ' s royalty allowance is so much of the royalty credits as does not exceed the mining profit ^[311] Minerals Resource Rent Tax Act 2012, s 60-15(1). . The royalty allowance, together with all other allowances, is deducted from the figure for mining profit in accordance with the formula in s 10-5, which is set out above ^[312] See [ 188 ] above. . A miner ' s liability for MRRT is then determined by multiplying that figure by the MRRT rate. By way of example, if the mining profit is $ 500 million and the MRRT allowances are $ 200 million, a miner ' s liability will be:

$ 300 million × 22.5 per cent = $ 67.5 million.

197. Because the calculation of a royalty credit, and therefore the royalty allowance, gives full credit for mining royalties in fact incurred by a miner, it follows that where the rate of royalty charged by one State varies from other States there will be differences in miners ' liability for MRRT. The plaintiffs provided a series of equations transforming the formula in s 10-10 that they say demonstrate the impact of royalty allowances on the ultimate liability for MRRT. Those equations, which refer to a so-called " effective rate " of MRRT, are not of particular assistance to the issues before the Court and may be put to one side.

198. There will be other differences in liability for MRRT, as between miners generally and as between miners in different States, resulting from the other allowances provided for in the MRRT Act . Further, MRRT liability will differ as between miners because their mining expenditure, which is deducted from revenue to ascertain mining profit, will be different. Such expenditure may include State taxes and levies other than mining royalties, such as payroll tax, workers ' compensation premiums and the like. These taxes and levies may also differ as between States.

Consideration of the s 51(ii) issue

Discrimination

199. Discrimination is a concept that arises for consideration in a variety of constitutional contexts ^[313] Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 629 [ 40 ] ; [ 2004 ] HCA 19 . . Section 51(ii) prohibits a Commonwealth taxation law discriminating " between States or parts of States " . The discrimination of which it speaks is discrimination on account of locality. Section 51(ii) requires that the States be treated alike and that a Commonwealth law relating to taxation not differentiate in its effect between the States.

200. In
R v Barger ^[314] (1908) 6 CLR 41 . , Isaacs J said that " [ d ] iscrimination between localities in the widest sense means that, because one man or his property is in one locality, then, regardless of any other circumstance, he or it is to be treated differently from the man or similar property in another locality " ^[315] R v Barger (1908) 6 CLR 41 at 110. . Although his Honour was in dissent in Barger , with Higgins J, this view of s 51(ii) was subsequently cited with approval in
Cameron v Deputy Federal Commissioner of Taxation ^[316] (1923) 32 CLR 68 at 72 per Knox CJ, 79 per Rich J; [ 1923 ] HCA 4 . , a case where a different standard was to be applied to the value of livestock solely by reference to " their State situation " ^[317] Cameron v Deputy Federal Commissioner of Taxation (1923) 32 CLR 68 at 76 per Isaacs J. .

201. Another statement by Isaacs J in Barger as to s 51(ii) is worthy of mention. It was referred to with approval by Evatt J in
Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd ^[318] (1939) 61 CLR 735 at 781; [ 1939 ] HCA 27 . and on appeal by the Privy Council in that case ^[319] W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW) (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856-857. . Isaacs J said ^[320] R v Barger (1908) 6 CLR 41 at 108. that the " pervading idea " of the discrimination to which s 51(ii) refers is " the preference of locality merely because it is locality … It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances " . Although his Honour was speaking of the reference in s 51(ii) to " parts of States " , what he said applies

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generally to the notion of discrimination with which s 51(ii) is concerned.

202. Although discrimination can be an abstract concept, working out whether the effect of legislation is discriminatory is largely a practical question involving the consideration of unequal treatment ^[321] Street v Queensland Bar Association (1989) 168 CLR 461 at 510; [ 1989 ] HCA 53 . . It involves a comparison ^[322] Street v Queensland Bar Association (1989) 168 CLR 461 at 506. . If a Commonwealth taxation law provides that the same measure is to apply to all persons or things subject to the tax, it would not generally be regarded as likely to discriminate in fact. Where a difference results from the operation of a taxation law, the question arises whether that difference is accounted for by the geographical situation of the subject of the tax. Importantly, for there to be the discrimination of which s 51(ii) speaks, the difference must be produced by the Commonwealth law itself and by reference to that geographical situation. There may not be discrimination where the difference results from the provisions of a State law. Section 51(ii) does not prohibit a taxation law from operating differentially in all respects. It does not require that a taxation law control the effect of other, external, factors which may be productive of a difference.

A general deduction?

203. The reference in Barger to " business circumstances " ^[323] See [ 201 ] above. brings to mind the possibility that the MRRT Act , in giving full credit for State mining royalties, does little more than permit a miner something in the nature of a deduction of a business expense from mining profits before those profits are subjected to taxation. As the Commonwealth points out, miners are able to deduct State imposts when calculating their liability for income tax. It is not suggested that Commonwealth income tax legislation, in the provision for general deductions which it allows for business expenses from income, operates so as to discriminate in any relevant respect. The allowance for mining royalties in the MRRT Act does not appear to be so different from deductions of this kind. In common with them, the allowance for mining royalties operates generally and does not discriminate between miners in different States. The allowance is provided whenever mining royalties are incurred by a miner, regardless of the miner ' s locality.

204. As the plaintiffs concede, their argument could not succeed had mining royalties been treated as mining expenditure under the MRRT Act . But they point out that the MRRT Act treats mining royalties differently from other mining expenditure. It expressly excludes them as items of mining expenditure. It further differentiates mining royalties from expenditure by allowing for them in full.

205. The State of Queensland, intervening in support of the plaintiffs, submits that the royalty allowance is to be distinguished from other, more general deductions because what the MRRT Act deducts is not the royalty paid, but a product of the operation of " grossing up " upon an operand. What is extracted by the division by the MRRT rate, in the formula in s 60-25, is not the amount of royalties paid, but the product of the calculation. This would seem to suggest that the royalty payment has, in the process, lost its quality as an item of business expenditure.

206. It must be accepted that the MRRT Act treats the payment of mining royalties separately, even from other mining allowances, in order that they may be " grossed up " and allowed for. Nevertheless, it is the payment of mining royalties upon which that calculation is based. Putting aside the inflated figure for royalty allowance, upon which the plaintiffs ' argument does not rely, it is the payment of mining royalties for which full credit is given. The fact that it is allowed for in full is a distinction without a point. The MRRT Act plainly acknowledges mining royalties as a sum which is likely to have been paid by miners to a State in the course of mining operations. The relevant effect of the royalty allowance is to give credit for what has been paid. It applies whenever such an expense is incurred and regardless of where it is incurred.

The credit of royalty payment as a standard

207. On its face, the calculation provided for by ss 10-5 and 25-5 would appear to operate uniformly. MRRT liability is determined by first identifying mining revenue, and then deducting certain mining expenditure and mining allowances. A uniform MRRT rate is applied to the figure arrived at. But the plaintiffs submit that it would be wrong to think that, because the Imposition Acts provide for a

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rate of 22.5 per cent, MRRT is levied uniformly.

208. The plaintiffs contend that the legislation in Cameron is analogous in effect to the MRRT Act . The Income Tax Regulations 1917 (Cth) there considered provided that, so far as concerned profits made on the sale of livestock, different values were to be placed on stock of the same kind in different States. For example, a horse in New South Wales was to be valued at £ 8, but a horse in Victoria at £ 15 and in Queensland £ 4.

209. The Deputy Federal Commissioner of Taxation proffered the explanation that the standard adopted was not arbitrary, but the actual average value of livestock in each State, which was merely recognised and enforced by the Regulations as a convenient and just method of valuing stock ^[324] Cameron v Deputy Federal Commissioner of Taxation (1923) 32 CLR 68 at 73-74. . That explanation was rejected. The reasons of Isaacs J ^[325] Cameron v Deputy Federal Commissioner of Taxation (1923) 32 CLR 68 at 74-77. disclose that the value attributed to stock according to the Regulations was not in fact a " fair average value " . Previously, the value of stock was to be that as determined by the Commissioner, but an amendment to the Regulations specified set values in a schedule ^[326] Statutory Rules 1918, No 315. . Had the Commissioner retained discretion to make the determination, the Commissioner would have had to take account of values on either side of the relevant State borders. What the Regulations produced was a value rigidly fixed for the State in which the stock was located. Thus a horse in Albury was worth £ 8, whereas the same horse, located across the river at Wodonga, was to be valued at £ 15.

210. Different standards were applied to different States by the Regulations in Cameron ^[327] (1923) 32 CLR 68 at 77. . This was the source of the discrimination. What was produced by the Regulations was a standard which was identified not by reference to value in fact, but by reference to locality. Unsurprisingly, the Regulations were held to offend s 51(ii). As was pointed out by Isaacs J ^[328] Cameron v Deputy Federal Commissioner of Taxation (1923) 32 CLR 68 at 73; see also at 72 per Knox CJ. , the only discrimen provided by the Regulations was " which State? " Cameron provides an unusually clear example of s 51(ii) discrimination.

211. The royalty allowance provided for in the MRRT calculation does not operate in this way. The standard it applies is the actual amount of mining royalties which a miner has incurred. In contrast to the facts in Cameron , any variation in MRRT payable from miner to miner results from that fact and not from any State-based standard applied by the MRRT Act . The only causal connection between the royalty allowance and a State is that mining royalties are only incurred by a miner because of a State law. The MRRT Act says nothing about the quantum of mining royalties except that they are to be allowed in full when incurred. This tells against notions of discrimination.

The cause of the difference?

212. In
Colonial Sugar Refining Co Ltd v Irving ^[329] [ 1906 ] AC 360 . ( " Irving " ) and in Barger , it was acknowledged that duties and levies in different parts of the Commonwealth would produce a differential effect for a Commonwealth law. It had been accepted by the framers of the Constitution that taxation may produce an indirect effect which was not uniform ^[330] R v Barger (1908) 6 CLR 41 at 69-70. .

213. The Excise Tariff 1902 (Cth), considered in Irving , exempted from the duties thereby imposed, goods upon which State customs duties had already been paid. However, the scale of duties differed as between the States so that the exemption operated unequally. An analogy with the provisions of the MRRT Act in this case is evident. Lord Davey, speaking for the Judicial Committee of the Privy Council, said ^[331] Colonial Sugar Refining Co Ltd v Irving [ 1906 ] AC 360 at 367, cited with approval in Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) (2004) 220 CLR 388 at 434 [ 127 ] - [ 128 ] ; [ 2004 ] HCA 53 . :

" The rule laid down … is a general one, applicable to all the States alike, and the fact that it operates unequally in the several States arises not from anything done by the Parliament, but from the inequality of the duties imposed by the States themselves. "

214. A different view was taken of a similar exemption by the majority in Barger and this drew strong dissents from Isaacs and Higgins JJ. Barger is also authority for a view concerning powers reserved to the States which has long since been discredited ^[332] See Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) (2004) 220 CLR 388 at 434 [ 129 ] . . This aspect of the case may be put to one side.

215. Barger was concerned with the Excise Tariff 1906 (Cth), which imposed duties of excise upon specified goods at specified rates. However, the tariff did not apply to goods manufactured by any person in any part of the Commonwealth under conditions of remuneration of labour which satisfied any one

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of four prescribed matters. The majority held there to be discrimination in the taxing scheme by reference to the criterion of locality because of the possibility that goods of the same class would be excisable in some parts of the Commonwealth, but not others ^[333] R v Barger (1908) 6 CLR 41 at 80. . Isaacs J saw the exemption as a general rule operating unequally only because of the inequality of industrial circumstances ^[334] R v Barger (1908) 6 CLR 41 at 110-111. . There may be something to be said for the view ^[335] Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 at 780-781 per Evatt J (in dissent). that the approach of Isaacs J in Barger is more consonant with the decisions in Cameron and in Irving . It is not necessary to resolve the differences of opinion in Barger for the purposes of this matter.

216. In
Conroy v Carter ^[336] (1968) 118 CLR 90 at 100-101; [ 1968 ] HCA 39 . , Taylor J, with whom Barwick CJ, McTiernan, Kitto, Menzies and Windeyer JJ relevantly agreed, after referring to decisions concerning the United States Constitution and its command of geographical uniformity, said that it was not necessary, for a tax to be lawful by reference to s 51(ii), that it select objects which exist uniformly in all States. A law cannot, in general, be said to discriminate if its operation is general throughout the Commonwealth even if, by reason of circumstances existing in one or more States, it may not operate uniformly. This reflects the view expressed in Irving . Taylor J gave the example of a State land tax, which Commonwealth income tax legislation allows as a deduction from income in the relevant year. That provision for deduction, his Honour observed, operates generally throughout the Commonwealth. The fact that in some States there may be no legislation imposing land tax does not mean that the Commonwealth income tax legislation discriminates between the States.

217. In the decision of the Full Court of the Supreme Court of Queensland in
The Colonial Sugar Refining Co Ltd v Irving ^[337] [ 1903 ] St R Qd 261 at 277. , Griffith CJ concluded that " [ i ] f the imposition of these duties leads to an inequality, it is not a defect in the Federal law; it arises from the fact that the laws of the States were different, which is quite another thing " . His Honour also observed that, were inequality to be viewed by reference to the operation of State law, the power of the federal Parliament would be limited by the laws of the States and by the mode in which the States had exercised their legislative powers. These observations point up the difficulties inherent in the plaintiffs ' argument, which identifies differences in State laws as relevant to Commonwealth laws, particularly given the supremacy of the latter by reason of s 109 of the Constitution.

218. The plaintiffs argue that the MRRT Act cannot be viewed in the same way as the legislation in the abovementioned cases because the MRRT Act itself provides for differential rates. It makes State mining royalties incurred an essential integer in the calculation of a miner ' s ultimate liability for MRRT. The calculation of royalty allowance is critical to that liability. The importance of this aspect of the plaintiffs ' argument may be seen from their statements that: the discrimination resides in the calculation; the MRRT Act is discriminatory because the royalty allowance is the basis of the Act ' s structure; and " the tax is one calculated directly by reference to the amount of the royalty " .

219. In substance, payment of mining royalties to a State is treated no differently from any other allowance or deduction by the MRRT Act , save in the respects previously mentioned. Those differences do not detract from the fact that mining royalties incurred are an amount for which credit is given and which reduces the amount of mining profits to be subjected to the MRRT rate. Mining royalties are essential to the calculation of a miner ' s ultimate MRRT liability in the same way as are other items of mining expenditure and mining allowances.

An equalised tax burden?

220. The State of Queensland contends that the MRRT Act seeks to bring about equality between miners in different States. It was the object of the MRRT Act to equalise a miner ' s overall tax burden. This can be seen by it operating so as to increase the MRRT liability in States with lower royalty rates, and vice versa.

221. In support of that argument, reliance is placed upon a statement made by Griffith CJ for the majority in Barger . After referring to what had been said in Irving , that it was the effect of the State, not the Commonwealth, laws that created the unequal burden, his Honour said ^[338] R v Barger (1908) 6 CLR 41 at 70-71. :

" E converso , if the Excise duty had been made to vary in inverse proportion to the Customs duties in the several States so as to

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make the actual incidence of the burden practically equal, that would have been a violation of the rule of uniformity. "

222. The MRRT Act does not operate as does the hypothetical law referred to in Barger . The law to which Griffith CJ referred is a law which itself adjusts according to the amount of State duties paid, so that the overall amount of Commonwealth and State taxes is equalised. By way of example, if mining royalties of $ 2 were paid by a miner in one State and $ 4 by a miner in another, a Commonwealth law would operate in the way contemplated by Griffith CJ if it provided that the firstmentioned miner pay Commonwealth tax of $ 4 and the second $ 2. The MRRT Act does not operate in this way. It is not structured to ameliorate the effect of the State mining royalties for miners, but rather makes provision for miners ' business circumstances, which may be affected by various State laws. It does not breach the constitutional prohibition in s 51(ii).

Conclusion on the MRRT Act and s 51(ii)

223. In
Conroy v Carter , Menzies J ^[339] Conroy v Carter (1968) 118 CLR 90 at 103. , with whom Barwick CJ and McTiernan J agreed, spoke of the discrimination to which s 51(ii) refers in the context of a taxation law which imposes a taxation burden. It may be accepted that s 51(ii) also prohibits a benefit which applies differentially as between the States. Expressing what his Honour said more generally, s 51(ii) forbids a taxation law which operates to benefit or burden a person because of some connection with a State, but which would not be granted to or imposed on other persons not having that connection. In determining whether a law operates in that way, it is to the Commonwealth law itself that attention is directed.

224. The MRRT Act provides generally for a royalty allowance, the calculation of which includes a credit for the whole amount incurred by a miner by way of mining royalties paid to a State. There is no standard of locality, of connection to a State, in the allowance made and in the deduction for which it provides. The standard is the fact and amount of payment. Any difference in the amount of the deduction for mining royalties results not from the MRRT Act but from the State legislation.

225. Those who drafted the MRRT Act may be taken to have been aware that rates of mining royalties differ as between the States. The point, however, is not that there is some underlying assumption of difference on which the MRRT Act operates, as the plaintiffs and the State of Queensland suggest, but rather that the MRRT Act allows for whatever mining royalties are required to be paid under State legislation. It is not the Commonwealth Act that creates any inequality or difference, but State legislation. The Commonwealth is entitled to do what the States do and base its taxation measures on considerations of fairness, so long as it adheres to the constitutional injunction not to prefer States ^[340] R v Barger (1908) 6 CLR 41 at 108; Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 at 781-782; W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW) (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856-857. .

226. A State royalty is treated by the MRRT legislation as an amount which is likely to have been incurred by a miner in connection with its mining activities. A miner ' s MRRT liability will be affected by the expenses which it incurs, the other allowances for which the MRRT Act provides and whether, in a given MRRT year, a royalty credit has been transferred or carried over. This brings to mind what was said by Griffith CJ in the Supreme Court of Queensland in
The Colonial Sugar Refining Co Ltd v Irving ^[341] [ 1903 ] St R Qd 261 at 276. , that the difference effected by the Excise Tariff 1902 was not discrimination created by Commonwealth law, but " a difference in the individual incidence of taxation " .

227. The MRRT legislation does not discriminate between States and does not create a preference for one over another.

The Melbourne Corporation doctrine

228. The plaintiffs ' claim that the MRRT legislation affects a State ' s capacity to control its sovereign territory and to deal with its natural resources, and Western Australia ' s submissions to similar effect, appear to reflect arguments which were put by Western Australia, and which were rejected, in
Western Australia v The Commonwealth ( Native Title Act Case ) ^[342] (1995) 183 CLR 373 at 478-479, 481; [ 1995 ] HCA 47 . , as Hayne, Bell and Keane JJ observe in their reasons.

229. The MRRT legislation is not directed to the States and does not affect the government of a State. It does not deny the ability of a State to fix a rate of mining royalty. Any effect upon a State ' s ability to offer incentives, by reducing

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ATC 15192

that rate or providing an exemption, is not a burden or limit respecting a State ' s constitutional functions. I agree with the reasons of Hayne, Bell and Keane JJ on this issue.

Section 91

230. Section 91 ^[343] See [ 185 ] , fn 296 above. , the plaintiffs submit, takes effect as a prohibition directed to any law made under a head of power in the Constitution which may hinder a State from providing the abovementioned incentives to a miner, as an encouragement to mining activity. In this regard, the plaintiffs rely upon the express provision, made in s 91, that " [ n ] othing in this Constitution prohibits a State from granting any aid " .

231. Section 91 must be read with s 90 ^[344] Section 90 of the Constitution provides: “ On the imposition of uniform duties of customs the power of the Parliament to impose duties of customs and of excise, and to grant bounties on the production or export of goods, shall become exclusive. On the imposition of uniform duties of customs all laws of the several States imposing duties of customs or of excise, or offering bounties on the production or export of goods, shall cease to have effect, but any grant of or agreement for any such bounty lawfully made by or under the authority of the Government of any State shall be taken to be good if made before the thirtieth day of June, one thousand eight hundred and ninety-eight, and not otherwise. ” . In
Seamen ' s Union of Australia v Utah Development Co ^[345] (1978) 144 CLR 120 ; [ 1978 ] HCA 46 . , the only decision of this Court which has been concerned with s 91, this Court discussed the relationship between ss 90 and 91. Mason J, with whom Jacobs and Aickin JJ agreed, observed ^[346] Seamen ’ s Union of Australia v Utah Development Co (1978) 144 CLR 120 at 147. that s 90 contains a prohibition which arises from the exclusive conferral on the Commonwealth Parliament of a power to impose duties of customs and excise and to grant bounties on the production and export of goods. The function of s 91 was said to relax that prohibition. The words " [ n ] othing in this Constitution " were held to refer back primarily, if not exclusively, to s 90 because there was no other provision in the Constitution which contained a relevant prohibition.

232. What was said in Seamen ' s Union provides the answer to the plaintiffs ' argument. Contrary to the plaintiffs ' contention, that case did decide that the purpose of s 91 is to qualify the prohibition in s 90. Section 91 does not itself operate as a prohibition on Commonwealth laws. Section 91 confirms that a State may grant aid, which is to say a State Parliament may authorise expenditure by this means; it does not speak of how Commonwealth laws might interact with that grant.

233. It is therefore not strictly necessary to point out that the plaintiffs do not refer to " aid " in the nature of a parliamentary grant of money, which is the sense in which it appears to have been understood in Seamen ' s Union ^[347] See (1978) 144 CLR 120 at 126 per Barwick CJ, 135 per Gibbs J, 140 per Stephen J, 148 per Mason J. . Stephen J, in particular, appears to have taken up the argument put by the State of Queensland there, that aid refers to a pecuniary payment authorised by Parliament. His Honour said that history supports a narrower view of aid than as general assistance ^[348] Seamen ’ s Union of Australia v Utah Development Co (1978) 144 CLR 120 at 140. . On that view, the incentives to which the plaintiffs refer would not amount to aid within the meaning of s 91.

Conclusion and orders

234. I agree with the orders proposed by Hayne, Bell and Keane JJ.