According to the report, Queensland Premier Anna Bligh has taken the side of the mining industry in the debate with the federal government over royalties in the proposed mineral resource rent tax (MRRT).
Her declaration Monday puts her at odds with Treasury boss Ken Henry and, potentially, the Prime Minister if the federal government reneges on allowing mining companies to credit state royalty payments against the new mineral resources rent tax.
The federal government and the mining industry are in a debate over who will pay any increase in state-based royalties when the MRRT is introduced.
Ms Bligh has also clarified that the states will reserve their right to lift their level of royalties, regardless of any federal deal on the proposed tax.
Under the 30 per cent MRRT, which is due to operate from July 2012, mining companies will still pay state royalties, but would have them credited against their MRRT liability.
Under the original resource super profits tax announced by the Rudd government, state royalties would be refunded as they stood on May 2, 2010. But the heads of agreement with BHP Billiton Ltd, Rio Tinto Ltd and Xstrata for the MRRT imposed no such limitation.
The companies argue all future royalties should therefore be credited against the amount they pay under the minerals resource rent tax.
But Prime Minister Julia Gillard has said it's "obvious" the federal government wouldn't be footing the bill if state governments changed royalty arrangements.
Last week, Xstrata chief executive Peter Freyberg told a Senate inquiry that his company wouldn't have signed a compromise deal in July if it wasn't clear-cut. Ms Bligh's stand will intensify concern among the miners that they face a twin-pronged tax grab from Canberra and the states should the federal government backtrack and limit the concession on state royalties to existing charges, leaving them to pay the difference on any future state royalty increases apart from the MRRT.
Another front in the escalating dispute opened up yesterday when the miners warned that Aboriginal communities could lose out on native title payments unless the Gillard government exempted the arrangements from its proposed mining tax.
The deal on the MRRT was hammered out by Ms Gillard, in one of her first acts as Prime Minister, to end the debilitating advertising war bankrolled by big miners outraged by the ill-fated resource super-profits tax proposed by Wayne Swan and backed by Kevin Rudd.
The Weekend Australian reported on Saturday that the miners were now preparing to resume their advertising blitz against the government in the belief they had been double-crossed on being allowed to offset "all" state royalties against the MRRT.
Dr Henry last month told the parliamentary tax review committee that while the heads of agreement on the MRRT signed by Ms Gillard and the big three miners - BHP Billiton, Rio Tinto and Xstrata - did refer to "all royalties", it did not explicitly say it would cover "all future royalties".
Miners are increasingly jittery that this is actually the government's position, exposing them to taxing from the state beyond the scope of the MRRT deal.
Ms Bligh emphasised yesterday that Queensland was not a party to the deal, and would reserve the right to increase state royalties regardless of what the miners had agreed to with Canberra. She said she was in accord with Western Australia Premier Colin Barnett on this.
"I think if you read the heads of agreement, it is open to interpretation that royalties mean royalties, wherever you are paying them," she told The Australian. Pressed on her interpretation of whether the deal covered only existing state royalties or extended to increases down the track, she said: "Queensland's understanding of the word royalty means it is royalty now, and royalty into the future."
Ms Bligh said the issue was a "semantic" one, as far as Queensland was concerned, between the miners and the federal government. The resource state had increased its coal royalty from 7.5 per cent to 10 per cent in 2008, bringing it into line with the state tax on other minerals, and any further rises would be years off.
"A democratically elected Queensland government in five, 10, maybe 15 years may decide to lift royalties, and if they do so, and then there is a gap in the arrangements, that is a matter for the mining companies and the federal government," she said.
Tony Abbott said the reports in The Weekend Australian were "just another case of the Prime Minister saying one thing before the election and doing something quite different after". "I can understand, first, why the big mining companies feel ‘dudded’, second why there is considerable resentment inside the Gillard cabinet at the way this matter has been handled by the Treasurer and by the Prime Minister”.
But Assistant Treasurer Bill Shorten said the mining tax remained critical to funding planned superannuation reforms. "We will land the mining tax. That will occur next year and we are completely committed to increasing the adequacy of people's retirement income, absolutely," he told Sky News's Australian Agenda.
"The mining tax is the absolutely best way to help fund the reforms we're making to superannuation, which will increase the adequacy of retirement payments for all Australians. We see the two as a package, and I'm completely confident that we'll land the mining tax next year."
Liberal frontbencher and chairman of the mining tax inquiry, Mathias Cormann, accused Ms Gillard of trying to "welsh" on a written agreement with the three big miners she used to solve the mining dispute before the election.