The West Australian Government said that it will fight any Federal Government moves to block it from increasing its state mining royalties once the new tax agreement is finalised.

The renegotiated agreement with the country's three biggest miners BHP Billiton, Rio Tinto and Xstrata reads that all state and territory royalties would be refunded from the proceeds of the new tax.

The Federal Government is considering withholding revenue from states if they try to increase their profits when the federal mining tax is introduced.

But WA Mines and Petroleum Minister Norman Moore said that it is the state's right to increase royalties if it chooses. He said that "We are in a state of being constantly threatened by the Federal Government.”

He added that "You will be aware that they are threatening to take away our GST to pay for their health reforms and we have resisted that so any attempt by the Federal Government to penalise any state that might want to change its royalties would just be another battle we'll have with them and we'll fight that. But the bottom line is that the Federal Government can't change the GST arrangements without the agreement of all the states and we certainly won't be agreeing to any of that."

Mr Moore said that the state government has been looking at legal advice regarding the constitutional validity of the federal mining tax ever since the tax was proposed. He said that "What the Federal Government is doing is trying to tax states like Western Australia in a way that doesn't apply to the other states and there is a significant constitutional issue attached to that.”

He added that "The Federal Government denied there was any constitutional issues and even the federal attorney general denied there was any constitutional issues during the tax debate and now we find from FOI documents that federal Treasury all along had been concerned about the constitutionality of it and that reinforces our view that there probably is a case to be had here."

Mr Moore said that the matter of royalties is a state issue as what the resources and minerals companies mine belong to the state, not the Federal Government.

He said that "We will charge for them what we choose, what we decide is a fair and reasonable price, and at this point in time I think we have a pretty good balance and most companies would accept that the fundamental principle of 10 per cent is a fair and reasonable payment for the resources they use to then go ahead and make a profit.”

(Sourced from www.abc.net.au)