Fortescue Metals Group Limited v The Commonwealth [2013] HCA 34 (7 August 2013)

Last Updated: 7 August 2013

HIGH COURT OF AUSTRALIA

FRENCH CJ,



HAYNE, CRENNAN, KIEFEL, BELL AND KEANE JJ

FORTESCUE METALS GROUP LIMITED & ORS PLAINTIFFS

AND

THE COMMONWEALTH OF AUSTRALIA DEFENDANT

Fortescue Metals Group Limited v The Commonwealth



[2013] HCA 34



7 August 2013



S163/2012

ORDER

The questions reserved for the consideration of the Full Court on 5 November 2012 be answered as follows:

Question 1

Are any or all of s 3 of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), s 3 of the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth) and s 3 of the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) invalid in their application to the plaintiffs on one or more of the following grounds:

they discriminate between the States of the Commonwealth of Australia contrary to s 51(ii) of the Constitution;



they give preference to one State of the Commonwealth of Australia over another State contrary to s 99 of the Constitution;





they so discriminate against the States of the Commonwealth or so place a particular disability or burden upon the operations or activities of the States, as to be beyond the legislative power of the Commonwealth?





Answer

No.

Question 2

Are any or all of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) and the Minerals Resource Rent Tax Act 2012 (Cth) invalid in their application to the plaintiffs on the ground that they are contrary to s 91 of the Constitution?

Answer

No.

Question 3

Who should pay the costs of the reserved questions?

Answer

The plaintiffs.

Representation

D F Jackson QC with B Dharmananda SC and W A D Edwards for the plaintiffs (instructed by Corrs Chambers Westgarth Lawyers)

J T Gleeson SC, Solicitor-General of the Commonwealth and N J Williams SC with G J D del Villar and D F C Thomas for the defendant (instructed by Australian Government Solicitor)

Interveners

W Sofronoff QC, Solicitor-General of the State of Queensland with A D Scott for the Attorney-General of the State of Queensland, intervening (instructed by Crown Law (Qld))

G R Donaldson SC, Solicitor-General for the State of Western Australia with A J Sefton and J D Berson for the Attorney-General for the State of Western Australia, intervening (instructed by State Solicitor (WA))

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Fortescue Metals Group Limited v The Commonwealth

Constitutional law – Powers of Commonwealth Parliament – Constitution, s 51(ii) – "[T]axation; but so as not to discriminate between States or parts of States" – Minerals Resource Rent Tax Act 2012 (Cth), Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth), Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) ("Acts") established and imposed minerals resource rent tax ("MRRT") – Amounts paid as State royalties allowed under Acts as royalty credits – Available royalty credits which do not exceed mining profit deductible from MRRT as royalty allowance – Effect of Acts alleged to be that liability to pay MRRT varies between States and that reduction in State royalty increases liability to pay MRRT by the amount of the reduction – Whether Acts discriminate between States contrary to s 51(ii) of Constitution.

Constitutional law – Constitution, s 99 – Prohibition on Commonwealth, by any law of revenue, giving preference to one State over another – Whether Acts give preference to one State over another.

Constitutional law – Melbourne Corporation doctrine – Whether Acts discriminate against or place particular burden upon operations or activities of States, beyond legislative power of Commonwealth Parliament.

Constitutional law – Constitution, s 91 – "Nothing in this Constitution prohibits a State from granting any aid to or bounty on mining for gold, silver, or other metals" – Whether Acts contravene s 91.

Words and phrases – "discrimination", "Melbourne Corporation doctrine", "minerals resource rent tax", "preference in trade, commerce or revenue", "State royalties", "States or parts of States".

Constitution, ss 51(ii), 91, 99.

FRENCH CJ.

Introduction

"ss 90 and 92, taken together with the safeguards against Commonwealth discrimination in s 51(ii) and (iii) and s 88, created a Commonwealth economic union, not an association of States each with its own separate economy." (footnote omitted)

Importantly, the proscription of differential taxes avoided distortion of "local markets within the Commonwealth."[5]

At a more detailed level, the interactions between ss 51(ii), 51(iii), 88 and 99 are as summarised by Latham CJ in Elliott v The Commonwealth [6]

"The sections mentioned operate independently, but they overlap to some extent. Laws of taxation, including laws with respect to customs duties, fall under sec 51(ii) and as laws of revenue they fall under sec 99. Laws with respect to bounties on the export of goods fall under sec 51(iii) and also, as laws of trade or commerce, under sec 99. A preference in relation to any of these subjects which infringed sec 99 would also be a prohibited discrimination or a prohibited lack of uniformity under one of the other sections. Preference necessarily involves discrimination or lack of uniformity, but discrimination or lack of uniformity does not necessarily involve preference."

The limitations imposed by ss 51(ii) and 99, which are in issue in this case, operate at a level of generality appropriate to their federal purposes. They do not prevent the Parliament of the Commonwealth from enacting uniform laws which have different effects in different States because of differences in the circumstances to which they apply, including different State legislative regimes. Nor do they apply to a law with respect to taxation merely because it provides for adjustments to the liabilities it imposes according to liabilities which might from time to time be imposed by differing State laws. The generality of the non-discrimination and no-preference limitations permits differences between States in the application of the law, for which the law makes provision, if such provision is based upon a distinction which is appropriate and adapted to the attainment of a proper objective [7] ss 51(ii) and 99. For the reasons that follow, the MRRT Act neither discriminates between States or parts of States nor gives preference to one State over another. For the reasons given in the joint judgment of Hayne, Bell and Keane JJ, s 91 of the Constitution has no effect on the validity of the Act. Nor, for the reasons given by their Honours, does the Act impair the capacity of the States to function as governments contrary to the principles explained in Melbourne Corporation v The Commonwealth [8] and more recently in Austin v The Commonwealth [9] Clarke v Federal Commissioner of Taxation [10] MRRT Act fail.

The questions reserved

On 5 November 2012, the Court ordered that the following questions be reserved for determination by the Full Court (on the basis of the pleadings and documents referred to in the pleadings):

"(i) Are any or all of s 3 of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), s 3 of the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth) and s 3 of the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) invalid in their application to the plaintiffs on one or more of the following grounds:

A. they discriminate between the States of the Commonwealth of Australia contrary to s 51(ii) of the Constitution;

B. they give preference to one State of the Commonwealth of Australia over another State contrary to s 99 of the Constitution;

C. they so discriminate against the States of the Commonwealth or so place a particular disability or burden upon the operations or activities of the States, as to be beyond the legislative power of the Commonwealth?

(ii) Are any or all of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) and the Minerals Resource Rent Tax Act 2012 (Cth) invalid in their application to the plaintiffs on the ground that they are contrary to s 91 of the Constitution?

(iii) Who should pay the cost of the reserved questions?"

An outline of the scheme of the legislation follows.

The structure of the tax

A miner is liable to pay MRRT for an MRRT year equal to the sum of its MRRT liabilities for each of its mining project interests for that year [11] [12]

"MRRT liability = MRRT rate x (Mining profit – MRRT allowances)".

The MRRT rate is 22.5%[13]. MRRT allowances are listed in Ch 3 of the MRRT Act. The "mining profit" for a mining project interest is the difference between "mining revenue" and "mining expenditure"[14].

The "mining revenue" for a mining project interest for an MRRT year is "the sum of all the amounts that, under this Act, are included in the miner's mining revenue for that interest for that year." [15] [16] The "mining expenditure" for a mining project interest for an MRRT year is "the sum of all the amounts that, under this Act, are included in the miner's mining expenditure for that interest for that year." [17] [18] [19] [20]

"(a) is made in relation to a taxable resource extracted under authority of a production right; and

(b) is made under a Commonwealth law, a State law or a Territory law; and

(c) either:

(i) is a royalty; or

(ii) would be a royalty, if the taxable resource were owned by the Commonwealth, State or Territory (as the case requires) just before the recovery of the resource."[21]

Although mining royalties payable to a State are excluded expenditure, they are to be deducted from mining profit in calculating MRRT liability. That is because they fall into the category of "MRRT allowances"[22]. That category is dealt with in Ch 3 of the MRRT Act. It consists of a number of classes of allowances which are defined by the Act[23]. The class immediately relevant to these proceedings is the "royalty allowance"[24].

Royalty allowances are dealt with in Pt 3–1 of Ch 3. That Part consists of Div 60, also entitled "Royalty allowances". The overview of the Division states [25]

"Mining royalties paid to the Commonwealth, States and Territories reduce a miner's MRRT liabilities for a mining project interest.

To work out the royalty allowance, the amount of the royalty is grossed-up using the MRRT rate, in effect reducing the MRRT liability by the amount of the royalty."

The mechanism that is adopted for bringing royalties into account is that of "royalty credits"[26]. Royalty credits not applied in one MRRT year can be applied in later years[27]. They are reduced if a miner recoups an amount giving rise to a royalty credit[28].

A royalty credit includes a liability to pay a mining royalty in relation to a taxable resource extracted under the authority of the production right to which the relevant mining project interest relates [29] [30] [31] [32] MRRT Act applies are interests in relation to iron ore and coal and some related substances. They are called "taxable resources" [33] [34] [35] The MRRT does not become payable until the miner's group mining profit for an MRRT year exceeds $75 million [36] [37] The plaintiffs submitted that the effect of the MRRT Act is that a miner's MRRT liability, when payable, is either inversely proportional to the miner's liability for State mining royalties or is directly related to the extent of the miner's liability for such royalties. That is to say, the MRRT Act is expressly designed so that if more State royalties are payable, less MRRT is payable, and vice versa. The plaintiffs submitted that, in the result, where MRRT is payable, a miner's liability will vary from State to State, depending upon the royalty rate applicable in that State. The Commonwealth took issue with the plaintiffs about the relationship between MRRT liabilities and State royalties. It did so by reference to the different times at which, and conditions under which, MRRT liabilities and State royalties could become payable. There are undoubtedly a number of variables which can affect the liability of a miner for MRRT in a given year or over a number of years. One of those variables is the royalty payable from time to time under State law. It is not necessary for present purposes to explore hypothetical cases that might arise and differences in the liabilities which might attach or be attributed to mining projects in one State or another. The issues raised in the questions reserved can be decided on the basis that, all other things being equal, the MRRT Act can have the effect that a miner's liability for MRRT is greater in a State with a lower applicable royalty than in a State with a higher applicable royalty. It can therefore also have the effect that when a State reduces the applicable royalty, a miner's liability for MRRT, all other things being equal, will increase. The arithmetical gymnastics that, according to the plaintiffs, would enable the outcomes to be characterised as the application of different "effective" MRRT rates between States can be disregarded. In the forefront of consideration in this case is the interpretation and application of ss 51(ii) and 99 of the Constitution. Their interpretation depends upon their text. It is informed by their drafting history and the decisions of this Court interpreting and applying them. Those decisions do not yield single, simply expressed and exhaustive explanations and definitions of the limitations on legislative power imposed by those provisions. The Court responds to the cases it is called upon, by the accidents of history, to decide. Judicial interpretation in particular cases must be seen in the context of the Court's function. As Windeyer J said in the Payroll Tax Case [38]

"Exegesis must not be substituted for the text."

That observation should be read in light of his Honour's approach to constitutional interpretation in the Australian context[39]:

"In any country where the spirit of the common law holds sway the enunciation by courts of constitutional principles based on the interpretation of a written constitution may vary and develop in response to changing circumstances. This does not mean that courts have transgressed lawful boundaries: or that they may do so."

What Windeyer J said echoed the remarks of Alfred Deakin, first Attorney-General of the Commonwealth, in his Second Reading Speech for the Judiciary Bill 1902 (Cth) in March 1902[40]:

"It is as one of the organs of Government which enables the Constitution to grow and to be adapted to the changeful necessities and circumstances of generation after generation that the High Court operates."

It is in that spirit that ss 51(ii) and 99 in their application to this case should be interpreted. That is a conservative spirit which nevertheless recognises that a written constitution should be able, consistently with textual limitations, to accommodate changing circumstances. That approach, in this case, requires consideration of the text and the drafting histories of ss 51(ii) and 99, their judicial exegesis and the particular questions to be decided about their application.

Constitution, s 51(ii) — drafting history

Section 51(ii) confers power on the Parliament of the Commonwealth, subject to the Constitution, 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 ambit of the power is expressly confined by the "positive prohibition or restriction" against discrimination between States or parts of States[41]. It stands adjacent to s 51(iii), which authorises the Parliament to make laws with respect to "bounties on the production or export of goods, but so that such bounties shall be uniform throughout the Commonwealth". Their drafting histories are closely connected. In the drafts proposed at the National Australasian Convention in Sydney in 1891[42] and the drafts reviewed at the Adelaide[43] and Sydney[44] sessions of the Convention in 1897, the powers in relation to both taxation and bounties were subject to a uniformity requirement. The provisions relating to customs and excise and bounties were separated into two clauses in 1898 and the former was overtaken by the general taxation power[45], a separation maintained in the final draft adopted by the Convention[46].

From the first drafts of the Constitution considered at the National Australasian Convention in Sydney in 1891 [47] [48] should be "uniform" throughout the Commonwealth. That constraint appeared in cl 55 of Inglis Clark's draft [49] appeared in Charles Kingston's draft [50] Constitution, which required that "all Duties, Imposts and Excises shall be uniform throughout the United States". At the time of the 1891 Convention, the uniformity requirement in Art I, s 8(1), which applied only to indirect taxes, had been considered by the Supreme Court of the United States in the Head Money Cases [51] [52]

"The tax is uniform when it operates with the same force and effect in every place where the subject of it is found."

The criterion of uniformity under Art I was understood to be geographical. However, that understanding was called into question shortly before the 1897 and 1898 Convention sessions by a separate concurring opinion of Field J in Pollock v Farmers' Loan and Trust Co[53]. Field J construed the uniformity requirement as forbidding a tax-free threshold and the imposition of different rates of the same tax on property income according to whether the income was derived by natural persons or various classes of corporation[54]. That opinion raised a concern at the National Australasian Convention which led to a change in the text of what became s 51(ii).

The change from a requirement of uniformity to a prohibition against discrimination appeared in the draft Constitution produced at the Melbourne session of the Convention on 12 March 1898 [55] Pollock. In moving his amendment, Barton said [56]

"I think that although the word 'uniform' has the meaning it was intended to have—'one in form' throughout the Commonwealth—still there might be a difficulty, and litigation might arise about it, and prolonged trouble might be occasioned with regard to the provision in case, for instance, an income tax or a land tax was imposed. What is really wanted is to prevent a discrimination between citizens of the Commonwealth in the same circumstances."

He described the amendment as preventing discrimination "or any form of tax which would make a difference between the citizen of one state and the citizen of another state, and to prevent anything which would place a tax upon a person going from one state to another."[57] Professor Harrison Moore, writing in 1910, summed up the concerns enlivened by the opinion of Field J. The uniformity requirement, he said, "was more than the federal spirit required; it prevented not merely discrimination among the States, but discrimination in the case of individuals", so the Convention "adopted terms of geographical limitation."[58]

Quick and Garran characterised the constraint in s 51(ii) as a "limitation ... provided for federal reasons" [59] [60] [61]

"to impose a high tax on commodities or persons in one State and a low tax on the same class of commodities or persons in another State, would be to discriminate. Such discriminations are forbidden, and uniformity of taxation throughout the Commonwealth is an essential condition of the validity of every taxing scheme."

Quick and Garran characterised the constraint in s 51(ii) as "practically the same in substance as the requirement of Art 1, s 8, sub-s 1, of the United States Constitution"[62]. That conclusion rested upon the unstated but correct assumption that what Field J had said did not state the law in the United States before or after Pollock.

The connection between Art I, s 8(1) and s 51(ii), reflected in the drafting history of s 51(ii), led to submissions in this case about decisions of the Supreme Court of the United States on the uniformity requirement. Some of them should be mentioned. The Head Money Cases and Pollock have been referred to. The geographical character of the uniformity requirement, rejected by Field J in Pollock, was reaffirmed in Knowlton v Moore [63] [64]

"in which case, the first would pay little or no part of the revenue arising therefrom, while the whole or nearly the whole of it would be paid by the last, to wit, the States which use and consume the articles on which imposts and excises are laid."

Much, of course, depends upon the level of generality of the requirement for uniformity or non-discrimination. The requirement for geographical uniformity in the United States was pitched by the decisions of the Supreme Court at a level of generality permitting differences across State boundaries in specific applications of the law. At a level of generality appropriate to its federal purpose, the non-discrimination requirement in s 51(ii) excludes, from legislative power with respect to taxation, laws which make distinctions between States or parts of States which are inconsistent with the economic unity of the Commonwealth and the status of the States and their people as equals inter se in the Federation. That level of generality does not require the exclusion from the scope of the taxation power of a uniform rule incorporating adjustments of liabilities that take account of liabilities imposed by State laws.

Reflecting that concept of uniformity informed by federal considerations, the Supreme Court of the United States in Florida v Mellon [65] Constitution required was that [66]

"the law shall be uniform in the sense that by its provisions the rule of liability shall be the same in all parts of the United States."

An analogous issue arose in Phillips v Commissioner of Internal Revenue[67], which concerned a federal law for recovery of corporate taxes from stockholders who had received the assets of a dissolved corporation. The Court did not accept an argument that the law offended Art I, s 8(1) on the basis that the liabilities might differ from State to State because of differences in State laws. Brandeis J, delivering the opinion of the Court, said that[68]:

"The extent and incidence of federal taxes not infrequently are affected by differences in state laws; but such variations do not infringe the constitutional prohibitions against delegation of the taxing power or the requirement of geographical uniformity."

The "settled doctrine" of the Court that "the uniformity exacted is geographical, not intrinsic" was reaffirmed in Steward Machine Co v Davis[69].

What might be thought to be a limiting decision was reached in 1983 in United States v Ptasynski [70] Crude Oil Windfall Profit Tax Act of 1980, which exempted from the tax which it imposed domestic crude oil produced from wells within a defined geographical area in Alaska, was valid. The exemption was found not to have been drawn on State political lines, but to reflect a legislative judgment that unique climatic and geographic conditions required that oil produced from the exempt area be treated as a separate class of oil [71] [72]

"The Uniformity Clause gives Congress wide latitude in deciding what to tax and does not prohibit it from considering geographically isolated problems."

The plaintiffs submitted that the United States decisions were "not on point". They quoted an observation of Dixon CJ in Deputy Federal Commissioner of Taxation v Brown [73] s 8 of the Constitution of the United States" [74] s 79 of the Judiciary Act 1903 (Cth) in taxation recovery proceedings, the observation was not apposite to the plaintiffs' proposition. The plaintiffs went further and characterised the Supreme Court's decisions on Art I, s 8(1) as "illogical" and "appear[ing] to neuter the requirement for uniformity." [75] The drafting history of s 51(ii) does not support an argument that the non-discrimination limitation differs fundamentally from the uniformity requirement in Art I, s 8(1) as it was understood before and after the "expressions" of Field J in Pollock. Quick and Garran's treatment of the two provisions as equivalent is supportive of that proposition, as are the observations of Harrison Moore. While decisions of the Supreme Court of the United States on uniformity cannot automatically be treated as applicable to the non-discrimination constraint in s 51(ii), they are appropriate sources of comparative constitutional law in its construction. In each case the principle underlying the limitation is a federal principle. In this country it allows the Commonwealth Parliament to make laws with respect to taxation which, by reason of differing circumstances, including State legal regimes, may have different effects in different States. As appears below, the principle does not preclude the Commonwealth Parliament from incorporating in its taxation laws uniform provisions of general application providing adjustments to the liabilities which they impose by reference to liabilities imposed under State law. It has done so for very many years.

Drafting history — s 99

Section 99 of the Constitution 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."

Section 99 was inspired by Art I, s 9(6) of the United States Constitution, which provides that:

"No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another".

Clause 54 of Inglis Clark's draft in 1891, like the United States provision, prohibited preference to the "ports of one Province over those of another" and added "nor shall vessels bound to or from one Province be obliged to enter or clear or pay duties in another."[76] Kingston's draft contained a similar provision[77]. In the final draft, which emerged from the 1891 Sydney session of the Convention, the equivalent provision, under the heading "Equality of Trade", was cl 11 of Ch IV, entitled "Finance and Trade" and provided[78]:

"Preference shall not be given by any law or regulation of commerce or revenue to the ports of one part of the Commonwealth over those of another part of the Commonwealth."

The no-preference provision, which emerged from the 1897 sessions of the Convention as cl 95, prohibited preference to the ports of one State over the ports of another with the addition that any law or regulation derogating from freedom of trade and commerce between different parts of the Commonwealth should be null and void [79] s 99 reflected in substance wording proposed by Edmund Barton [80] Quick and Garran viewed s 99 in its application to taxation laws as adding little, if anything, to s 51(ii). They said [81]

"This section, therefore, extends to all laws and regulations of trade, commerce, and revenue, the condition which is elsewhere imposed with regard to laws dealing with taxation—viz, that they shall not discriminate between States or parts of States."

Its object was "to prevent federal favoritism and partiality in commercial and other kindred regulations."[82] A similar view of the relationship between the uniformity and no-preference rules in Art I, s 8(1) and Art I, s 9(6) of the United States Constitution had been expressed in Knowlton v Moore[83], in which the Supreme Court held that, although couched in different language, they had "absolutely the same significance."[84]

This Court's treatment of the relationship between the non-discrimination and no-preference limitations recognises that "while preference necessarily involves discrimination or lack of uniformity, the latter does not necessarily involve the former." [85] MRRT Act cannot be said to discriminate within the meaning of s 51(ii) it cannot be said to give a preference within the meaning of s 99. The difficulty of identifying a prohibited preference given to one State over another where there were dissimilar circumstances was recognised by Quick and Garran. They foreshadowed the application of a criterion of reasonableness to the characterisation of preferences [86]

"If a difference of treatment is arbitrary, or if its purpose is to advantage or prejudice a locality, it is undue and unreasonable, and is accordingly a preference. If on the other hand the difference of treatment is the reasonable result of the dissimilarity of circumstances—or if it is based on recognized and reasonable principles of administration—it is no preference."

That approach to characterisation was reflected in the general observation about the concept of discrimination made by Gaudron, Gummow and Hayne JJ in Austin v The Commonwealth[87], and quoted by the majority in Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) in its discussion of the application of s 99[88]:

"The essence of the notion of discrimination is said to lie in the unequal treatment of equals or the equal treatment of those who are not equals, where the differential treatment and unequal outcome is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective." (footnotes omitted)

Their Honours' observation did not amount to a qualification justifying a law which would otherwise exceed the constitutional limitations. It set out a criterion for characterisation of a law as discriminatory for the purposes of s 51(ii). It was invoked by the Commonwealth in its submissions. The plaintiffs submitted that the reasoning of the majority in Permanent Trustee in this respect should not be followed. That submission should not be accepted. Before considering it further, however, it is desirable to consider the concepts of discrimination and preference in ss 51(ii) and 99 as they have emerged from the decisions of this Court.

Sections 51(ii) and 99 — discrimination, preference and differential operation

The uniformity requirement in the draft Constitution, as it stood after the Convention session held in Adelaide in 1897, attracted a "friendly suggestion" [89] [90] [91] s 51(ii), which was undertaken by the Full Court of the Supreme Court of Queensland, in The Colonial Sugar Refining Co Ltd v Irving [92] s 51(ii), that [93]

"the discrimination must depend upon the geographical position, and not upon the accident of whether things happen to be found in one State or in another."

The Full Court held that a Commonwealth law, imposing liability to excise duty on goods and providing an exemption for goods which had been subject to excise duties under State laws, did not discriminate within the meaning of s 51(ii). The Privy Council agreed[94]:

"The rule laid down by the Act 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."

The plaintiffs submitted that a Commonwealth tax cannot impose different tax rates on different taxpayers in different States even when the result is that the total tax burden, both Commonwealth and State, upon all taxpayers is the same. They argued that CSR did not apply to such a case because in CSR the impugned duty was made payable on all sugar on which customs or excise duty had not been paid pursuant to State laws before 8 October 1901. That criterion of liability was said to identify a class of goods in respect of which excise duty was payable and to which it applied uniformly. That may be one way of characterising the tax in CSR. But, as appears from the judgments of the Full Court and the Privy Council, the basis upon which the tax was upheld was not so narrowly framed [95] It is not controversial that a law which is uniform across the Commonwealth and does not in terms discriminate between States or parts of States can nevertheless have different effects between and within the States because of the circumstances upon which it operates, including the different State legal regimes with which it interacts. An example in the latter category from the United States is a law of the kind considered in Phillips v Commissioner of Internal Revenue [96] It may be accepted that a Commonwealth law with respect to taxation which expressly provides, in a uniform rule, for the adjustment of the liabilities it imposes by reference to liabilities imposed by State laws is not logically completely congruent with a law which has differential effects across State boundaries or between parts of States because of its interaction with particular State laws. That does not mean, however, that such a law discriminates between States or parts of States. The term "discriminate" may vary in its precise meaning according to its context and can be difficult to define and apply. However that may be, as interpreted by the decisions of this Court on s 51(ii), it does not place the MRRT Act beyond power. As the plurality said of the concept of discrimination generally in Bayside City Council v Telstra Corporation Ltd [97]

"It involves a comparison, and, where a certain kind of differential treatment is put forward as the basis of a claim of discrimination, it may require an examination of the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified." (footnote omitted)

Their Honours went on to emphasise that judgments about relevance, appropriateness or permissibility of a distinction may be influenced strongly by context[98].

The Commonwealth submitted that a correct formulation of the concept of discrimination in s 51(ii) was to be found in the judgment of Isaacs J in his dissent in R v Barger [99] [100]

"Discrimination 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."

Higgins J reasoned along similar lines and observed that it would not be discrimination between States or parts of States if a graduated income tax were introduced when incomes were higher in one State than in another[101].

Controversy later attended another observation made by Isaacs J, in the same judgment, that discrimination under s 51(ii) was "preference of locality merely because it is locality, and because it is a particular part of a particular State." [102] W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW) [103] which many years later in Commissioner of Taxation v Clyne [104] [105] Geoffrey Sawer critically characterised as establishing a special criterion of "Stateishness" [106] The majority in Barger [107] finding was wrong. Their conclusion as to discrimination was reached in the shadow of the reserved powers doctrine, which the majority described as a rule which was "different, but ... founded upon the same principles." [108] was not surprising. In a passage relied upon by the plaintiffs, the majority also distinguished CSR, observing that [109]

"if the Excise duty had been made to vary in inverse proportion to the Customs duties in the several States so as to make the actual incidence of the burden practically equal, that would have been a violation of the rule of uniformity."

Despite their dissent in Barger, the differential operation of laws permitted under the approach taken by Isaacs and Higgins JJ did not differ markedly from that permitted in later cases and in decisions on Art I, s 8(1) by the United States Supreme Court. The formulation by Isaacs J of discrimination in the "widest sense" was expressly adopted and applied in Cameron v Deputy Federal Commissioner of Taxation [110] [111]

"A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution merely because it operates unequally in the different States—not from anything done by the law-making authority, but on account of the inequality of conditions obtaining in the respective States."

Knox CJ and Powers J, in James v The Commonwealth[112], also expressly adopted the formulation by Isaacs J in Barger and his equation of the non-discrimination limitation in s 51(ii) with the no-preference rule in s 99[113]. Higgins J, "[a]fter twenty years", adhered to what he had said in Barger and asserted its relevance to s 99 "as one cannot conceive of any preference without discrimination"[114]. Starke J adhered to what he had said in Cameron[115]:

"if a law is not applicable to all States alike, then it operates unequally between the States, and discriminates as a law between them."

As Dennis Rose wrote in 1977, what Isaacs J said in his often quoted definition of discrimination in the "widest sense" had nothing to do with the proposition in the same judgment that discrimination for the purposes of s 51(ii) is limited to discrimination between localities as States or as parts of States [116] correctly observed that much of the subsequent support for what Isaacs J had said referred to the "widest sense" formulation. In Elliott v The Commonwealth [117] s 99, the Court, by majority [118] regulations for the licensing of seamen applicable only to ports specified by the Minister. Latham CJ followed the approach taken by Isaacs and Higgins JJ in Barger, by the majority in Cameron, and by Knox CJ and Powers J in James. The Commonwealth, he held, was empowered to adjust its legislation to the varying circumstances of particular ports [119] [120] sec 99." [121] [122] Barger remained the leading authority on s 99, but preferred the view of the majority of the Court in that case, that s 99 "forbids all preferences which arise solely as a legal consequence of association with or reference to any locality in 'Australia,' ie, 'one or more of the States of Australia.'" [123] In Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd [124] imposed a uniform tax coupled with a law appropriating money for grants to Tasmania. The grants were made to enable the State to pay rebates to Tasmanian flour and wheat producers on the tax which they had paid to the Commonwealth. Once it was accepted that the relevant taxation laws, applying as they did a common rule, did not discriminate, the conclusion that the scheme as a whole did not contravene s 51(ii) did not require exegesis of the concept of discrimination. To that extent, the approval by the Privy Council of what Isaacs J said in Barger was not directly apposite to its reasoning, which rejected the attack on the scheme as one "really based on the exercise by the Commonwealth Parliament of its powers under sec 96." [125] Commissioner of Taxation v Clyne [126] s 79A of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth), which prescribed allowable deductions in different amounts for residents of different geographical zones, offended against the restrictions in ss 51(ii) and 99. That question was not answered for reasons to do with the way the issues fell out in the case. However, Dixon CJ, with whom McTiernan, Williams, Kitto and Taylor JJ agreed, rejected the proposition, derived from the judgment of Isaacs J in Barger, that taxing legislation would not discriminate unless in some way the parts of the State in respect of which it discriminates were selected by virtue of their character as parts of a State [127] [128]

"I find myself unable to appreciate the distinction between the selection by an enactment of an area in fact forming part of a State for the bestowal of a preference upon the area and the selection of the same area for the same purpose 'as part of the State'."

That observation did not involve any rejection of the formulation by Isaacs J of "discrimination" in its "widest sense" as used in s 51(ii).

Under the general principle that a non-discriminatory law may have different effects according to its interaction with different State laws, Taylor J in Conroy v Carter [129] Commonwealth income tax laws of sums paid by taxpayers for land tax imposed under any law of a State. He said [130]

"This is a provision which operates generally throughout the Commonwealth and the fact that in some States there may be no legislation imposing land tax does not mean that it discriminates between the States."

The asserted discrimination in Conroy was related to liability for certain Commonwealth levies, which depended upon the existence or otherwise of arrangements between the Commonwealth and particular States. The Court divided evenly and, by a statutory majority, held the impugned provision invalid. However, nothing in the reasons of Menzies J, who wrote the principal judgment for that majority, conflicted with the observation of Taylor J concerning the deductibility of sums paid under State law from income assessable for the purposes of the Commonwealth law. The Commonwealth relied upon the statement by Menzies J, with which Barwick CJ and McTiernan J agreed[131]:

"in determining whether a law imposes such a discriminatory burden, it is to the law itself that attention must be paid, not to the laws of any State or States."

The passage from the judgment of Taylor J, including what his Honour said about the deductibility of State land tax from assessable income, was footnoted by Gleeson CJ, Gummow and Hayne JJ in support of their Honours' observation in Austin v The Commonwealth [132]

"A law with respect to taxation, in general, does not discriminate in the sense spoken of in s 51(ii) if its operation is general throughout the Commonwealth even though, by reason of circumstances existing in one or more of the States, it may not operate uniformly."

The inclusion, under the rubric of differential but non-discriminatory operation, of a taxation law providing for the deductibility of expenditures incurred under State laws may unite categories of differential operation which are not precisely logically congruent. It nevertheless reflects an interpretation of the non-discrimination constraint at a level of generality which is consistent with its federal purpose.

The Commonwealth invoked the longstanding deductibility, for income tax purposes, of State payroll tax, State land tax, State royalties and "indeed any State impost that is an expense or outgoing incurred by a taxpayer in the circumstances identified in s 8–1(a) or (b) of the Income Tax Assessment Act 1997 (Cth)" ("the ITAA 1997"). The plaintiffs argued that there is a critical difference between the way in which royalty credits affect the imposition of the MRRT and the way in which deductions for State imposts are permitted by the ITAA 1997. That distinction was, with respect, an irrelevant matter of form rather than of substance. It may be accepted that the longstanding provision in taxation laws for deductions for expenses which may include liabilities under State laws does not itself provide the determinative answer to the constitutional question in any given case: does a law of taxation which makes such allowances impermissibly discriminate between States? Nevertheless, the subsistence of such laws over a long period of time, reflecting a practical and legitimate interaction in Commonwealth and State financial relationships, may constitute "circumstances" of the kind to which Windeyer J referred in the Payroll Tax Case which in turn inform the contemporary interpretation and application of the Constitution. They may, on that basis, be relevant to the application of a criterion of the kind foreshadowed by Quick and Garran in determining whether an impugned law discriminates or gives a preference within the meaning of the limitations imposed by ss 51(ii) and 99. That question is considered in the next section of these reasons.

Reasonable differences

The Commonwealth submitted that even if the MRRT Act gave rise to differential treatment or unequal outcomes as between States, it did not follow that it was a law made "so as to discriminate between States or parts of States". Relying upon the passage from Austin quoted in Permanent Trustee and set out earlier in these reasons [133] the MRRT being a tax on profits, not on revenue, Parliament was entitled to conclude that profits could not accurately be identified without regard to costs and outgoings incurred in the course of deriving revenue — one such class of costs and outgoings being royalty payments made to the relevant State Government;

the MRRT being a tax on profits, not on revenue, Parliament was entitled to conclude that profits could not accurately be identified without regard to costs and outgoings incurred in the course of deriving revenue — one such class of costs and outgoings being royalty payments made to the relevant State Government; the MRRT being a tax on above normal profits or economic rents, the Act proceeds on the basis that royalties may indirectly and at least in part constitute charges on the economic rents which the Act makes subject to taxation. To ignore State royalties in the calculation of the MRRT liability would be to risk imposing a tax on economic rents at a higher rate than intended or on profits that were merely necessary to preserve the economic viability of a mining project.

On that basis, the Commonwealth submitted that any differential treatment or unequal outcome under the MRRT Act was the product of a distinction which was appropriate and adapted to the attainment of the objectives identified, each of which was a proper objective of the Parliament. The plaintiffs submitted, in effect, that such reasoning had no place in the characterisation of the MRRT Act as discriminatory or otherwise. If the law were unequally imposed it was prohibited by s 51(ii) regardless of the objectives.

It should be noted that although the Commonwealth put its argument on the hypothesis, which it denied, that the MRRT Act had a differential treatment or unequal outcome as between States the constitutional question is one of discrimination or preference. What the Commonwealth seemed to argue as a matter of confession and avoidance was in truth an aspect of characterisation of the MRRT Act for the purposes of ss 51(ii) and 99. As explained earlier in these reasons, the constraints imposed by ss 51(ii) and 99 of the Constitution serve a federal purpose — the economic unity of the Commonwealth and the formal equality in the Federation of the States inter se and their people. Those high purposes are not defeated by uniform Commonwealth laws with respect to taxation or laws of trade, commerce or revenue which have different effects between one State and another because of their application to different circumstances or their interactions with different State legal regimes. Nor are those purposes defeated merely because a Commonwealth law includes provisions of general application allowing for different outcomes according to the existence or operation of a particular class of State law. A criterion for determining whether that category of Commonwealth law discriminates or gives a preference in the sense used in ss 51(ii) and 99 is whether the distinctions it makes are appropriate and adapted to a proper objective. The Commonwealth Places (Mirror Taxes) Act 1998 (Cth) ("the Mirror Taxes Act") fell into the category just described, applying as it did the different tax laws of each State to Commonwealth places within that State. As this Court held in Permanent Trustee, s 51(ii) did not apply at all to the Act because it was a law made under s 52(i) [134] s 99. On reasoning applicable to s 51(ii), the Court held that the Mirror Taxes Act did not give a preference to one State or any part thereof over another State or any part thereof. The majority said [135]

"The scheme of the Mirror Taxes Act may produce differences in revenue outcomes between States, but that mirrors the differences that exist between the different taxation regimes from State to State. The differential treatment and unequal outcome that is involved here is the product of distinctions that are appropriate and adapted to a proper objective."

The objective of the impugned provision in that case was non-discriminatory. So too are the objectives of the impugned provisions of the MRRT Act. In general terms, they are those set out in the stated objectives of the Act referred to at the commencement of these reasons. The differences in the operation of the MRRT Act which arise out of its interaction with different royalty regimes serve those objectives. They are proper objectives, to which the impugned provisions are appropriate and adapted. The text, history, purpose and judicial exegesis of s 51(ii) require that the question whether the MRRT Act discriminates impermissibly be answered in the negative. It follows for reasons given earlier that the question whether the MRRT Act gives a preference contrary to s 99 is also to be answered in the negative.

Conclusion

The questions reserved should be answered:

(i) No.

(ii) No.

(iii) The plaintiffs.

HAYNE, BELL AND KEANE JJ. The minerals resource rent tax ("MRRT") is imposed by 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) (together "the Imposition Acts"). The assessment of the MRRT is provided for by the Minerals Resource Rent Tax Act 2012 (Cth) ("the MRRT Act"). In conformity with the intention declared in s 1-10 of the MRRT Act to tax "above normal profits" from certain mining operations, MRRT is not exigible until a miner's group mining profit exceeds a prescribed threshold. Under the MRRT Act, a liability to pay MRRT arises only when a miner derives an annual profit of a given amount after taking into account all deductions for expenditure (including of capital), all allowances (including those carried forward at uplifted rates) and any applicable tax offsets. Once MRRT is payable, however, the formula by which its amount is calculated operates so that a reduction in the mining royalty payable to a State government would, other things being equal, result in an equivalent increase in the amount of the MRRT liability, and an increase in the royalty would, other things being equal, result in an equivalent decrease in the miner's MRRT liability. As it happens, State mining royalties differ between the States within the federation. The plaintiffs, who are members of a group of companies which mine iron ore in Western Australia, brought proceedings in the original jurisdiction of this Court challenging the validity of the MRRT Act and of those provisions of the Imposition Acts which impose the tax. Pursuant to s 18 of the Judiciary Act 1903 (Cth), questions were reserved for determination by the Full Court on the basis of the parties' pleadings and documents referred to in the pleadings.

The issues

The plaintiffs founded their challenge to the validity of the MRRT Act and s 3 of each of the Imposition Acts (together "the MRRT Legislation") principally on the ground that s 51(ii) of the Constitution expressly precludes the imposition by the Commonwealth of a tax which would exact a greater amount of tax from a taxpayer whose mining operations are conducted in a State with a lower mining royalty rate than would be exacted from the same miner if the same mining operations were conducted by it in a State with a higher State royalty rate. The plaintiffs also contended for the same result by invoking the constitutional implication associated with this Court's decision in Melbourne Corporation v The Commonwealth [136] s 99 of the Constitution and its prohibition against the Commonwealth, by any law or regulation of trade, commerce or revenue, giving "preference to one State or any part thereof over another State or any part thereof". Finally, the plaintiffs argued that the MRRT Legislation is invalid because it is inconsistent with s 91 of the Constitution. The Attorneys-General for the States of Queensland and Western Australia intervened to support the plaintiffs' challenge. These reasons will demonstrate that the plaintiffs' challenge fails and the questions reserved should be answered accordingly. The reasons will first provide a summary of the relevant legislative provisions and then deal, in turn, with s 51(ii), s 99, the Melbourne Corporation principle and s 91.

The MRRT Legislation

Each of the Imposition Acts provided in s 3(1) that MRRT payable under the MRRT Act "is imposed". Section 4 of each of the Imposition Acts provided for an "MRRT rate" of 22.5 per cent. The Imposition Acts operated in the alternative to each other: see s 3(2). It was not disputed that the Minerals Resource Rent Tax (Imposition—General) Act 2012 was the relevant Imposition Act for present purposes. The Revised Explanatory Memorandum to the Bills for the MRRT Legislation explained [137] [138] The MRRT Legislation is complex; and it is unnecessary to grapple with all of its complexities. It is sufficient for the purposes of this case to refer only to the central provisions that bear upon the calculation of the MRRT.

Calculating MRRT

Section 1-10 of the MRRT Act provides that:

"The object of this Act is to ensure that the Australian community receives an adequate return for its taxable resources, having regard to:

(a) the inherent value of the resources; and

(b) the non-renewable nature of the resources; and

(c) the extent to which the resources are subject to Commonwealth, State and Territory royalties.

This Act does this by taxing above normal profits made by miners (also known as economic rents) that are reasonably attributable to the resources in the form and place they were in when extracted."

MRRT is payable for an "MRRT year" [139] [140] MRRT Act provides that:

"A miner is liable to pay MRRT, for an MRRT year, equal to the sum of its MRRT liabilities for each of its mining project interests for that year."

Mining project interests are associated with "production rights" and, for present purposes, it is enough to notice that "production rights" include[141] extraction rights conferred by a State government in respect of a particular geographical part of the State. The mining project interests to which the MRRT Act applies are interests in relation to iron ore and coal (and some related substances), located in areas covered by a production right, which together are called "taxable resources"[142].

Section 10-5 of the MRRT Act provides that a miner's MRRT liability for a mining project interest for an MRRT year is to be worked out as follows: "MRRT liability = MRRT rate x (Mining profit – MRRT allowances)". Thus the amount of the MRRT liability for each mining project interest is calculated by subtracting from the "mining profit" certain "MRRT allowances". The sum so arrived at is then multiplied by the MRRT rate to establish the MRRT liability for each mining project interest. A miner's "mining profit" is calculated [143] MRRT Act. The "mining expenditure" for each mining project interest is determined in accordance with Div 35 of the MRRT Act. The amounts to be deducted from mining revenue as mining expenditure do not include [144] [145] If a miner's "group mining profit" for an MRRT year is less than $125 million, the miner is entitled [146] [147] s 45-10 and the miner will be liable to pay less than the amount that would be payable if MRRT at the rate of 22.5 per cent were to be applied to the full amount of the profit.

Taking account of royalties

For the purposes of the MRRT Act, royalties payable under a State law by a miner in relation to a taxable resource extracted under authority of a production right are one form of "mining royalty" [148] [149] [150] [151] [152] [153] The "royalty credit" attributable to payment of a mining royalty is arrived at by dividing [154] [155] 25(2). The plaintiffs emphasised that the MRRT Act "is expressly designed so that, if more State royalties are payable, less MRRT is payable" and vice versa. As is later explained more fully, the plaintiffs submitted that two results followed. First, "a miner's actual liability to [pay] MRRT will vary from State to State, depending on the royalty rate applicable in that State". Second, "a State cannot reduce the royalty payable in respect of mining for iron ore, nor can it give a concession in respect of its royalty rate, nor can it change, favourably to the miner, the basis of calculating royalty without the miner becoming liable to pay to the Commonwealth, as MRRT liability, the amount by which its liability to pay royalty to the State has been reduced". It followed, so the argument continued, that the MRRT Legislation in effect imposed a uniform cumulative rate of mineral rent throughout the Commonwealth, which discriminates between the States, by equating the "sacrifice" of miners in low royalty States with that of those in high royalty States and "imposing MRRT at a different effective rate in different States" (emphasis added).

Section 51(ii)

Section 51(ii) provides that, "subject to this Constitution", the Parliament may make laws with respect to "taxation; but so as not to discriminate between States or parts of States". In construing and applying s 51(ii), it is necessary to begin by identifying its place in the constitutional structure. It is a legislative power. The power is expressed very broadly, at least in the sense that "taxation" may take many forms. Apart from those forms of taxation dealt with in s 90 (duties of customs and of excise), the legislative power given by s 51(ii) is not exclusive to the federal Parliament. But the power is subject to some important limitations in addition to the express limiting clause contained within it: "but so as not to discriminate between States or parts of States". First, there is the prohibition in s 114 against the Commonwealth imposing "any tax on property of any kind belonging to a State". Second, s 99 provides that "[t]he 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". Third, s 92 prohibits taxing interstate trade, commerce and intercourse. And fourth, there is the implied limitation on legislative power recognised in Melbourne Corporation [156] Austin v The Commonwealth [157] Clarke v Federal Commissioner of Taxation [158] Three textual points may then be made about the concluding words of s 51(ii). First, the reference to discriminating between "parts of States" suggests that the concluding words of s 51(ii) are to be read as directed against laws which discriminate between States, or parts of States, on the basis of geography or locality. "[P]arts of States" must be defined geographically. There is no textual foundation for reading the reference to "States", as distinct from "parts of States", in any different way. Second, the concluding words of s 51(ii) do not speak of a law that discriminates against States or parts of States. The expression used is "so as not to discriminate between States or parts of States" (emphasis added). Third, it is necessary to recognise that the words "but so as not to discriminate" qualify a power to make laws with respect to taxation. And as already explained, the Commonwealth's power to make laws with respect to taxation is also limited by the provisions of ss 92, 99 and 114, and by the principle in Melbourne Corporation. The concluding words of s 51(ii) are a "positive prohibition or restriction" [159] [160] s 51(ii) that:

"This is a limitation which has been provided for federal reasons, viz, for the protection of States which might not possess sufficient strength in the Federal Parliament to resist the imposition of a system of taxation designed to press more heavily on people or property in some States than on people or property in other States."

How then should the prohibition or limitation, "so as not to discriminate between States or parts of States", be understood? The plaintiffs accepted that a federal income tax imposed at the rate of 45 per cent on iron ore companies throughout Australia would not discriminate within the meaning of s 51(ii) of the Constitution, even though it might operate differently in different States. They accepted that such a law would not discriminate between States by reason only of the circumstance that, because Western Australia has the largest deposits of iron ore, Western Australian iron ore companies would contribute the largest amount of tax. And it was common ground that a federal income tax imposed at different rates in different States (say 40 per cent in New South Wales, 45 per cent in Queensland and 50 per cent in Western Australia) would discriminate between States, no matter what may be the reason for seeking to apply different rates of tax in the different States. There was no dispute that a law of this latter kind would contravene the constitutional limitation on power in s 51(ii) because it would impose different rates of tax based on the location of the subject of taxation in one State or another.

The competing arguments about discrimination

The plaintiffs argued that the MRRT Legislation contravened the limitation on the legislative power conferred by s 51(ii) because "in terms" the MRRT Legislation imposed a tax calculated and payable at a different rate for each State by reference to the different royalty rates of the various States. The MRRT Legislation was structured, the plaintiffs argued, "so as to impose MRRT on miners in different States at different effective rates". The MRRT Legislation was said to discriminate against the low royalty States by imposing an equalising burden of tax on mining operations in those States. There is considerable irony in the circumstance that the plaintiffs' argument, that the allowance made for State royalties invalidates the MRRT Legislation, would be obviated if the Parliament had made no allowance for those outlays, when that is a course that might fairly be said to be unfair to taxpayers. The plaintiffs argued that it is not correct to say that, because s 4 of each Imposition Act provided for an "MRRT rate" of 22.5 per cent, MRRT was imposed at a uniform rate throughout the Commonwealth. The plaintiffs submitted that the MRRT Legislation was enacted in the face of existing and different State royalty regimes. The MRRT liability is the product of the formula in s 10-5 of the MRRT Act, in which one element, the royalty allowance, varies from State to State. The consequence, the plaintiffs submitted, was that, as a matter of substance, the MRRT was imposed at different rates in different States and thus discriminated between States. The plaintiffs and Queensland emphasised that it was the royalty credits comprising the royalty allowance, and not the actual amount of royalty paid by a miner to a State, which ss 10-5 and 60-25 of the MRRT Act required to be deducted from mining profit before applying the MRRT rate to determine the MRRT liability. Section 60-25 required that royalty payments made by a miner be "grossed-up" by dividing them by the MRRT rate to determine the amount of the royalty credit. Thus, a miner which paid to a State royalties of $22.5 million was entitled to a royalty credit of $100 million (being the royalty payment divided by the MRRT rate of 22.5 per cent). Queensland submitted that the economic effect of ss 10-5 and 60-25 was the same as if the amounts paid for State royalty were deducted directly from the MRRT liability. Accordingly, so it was submitted, the effect of the MRRT Legislation was to impose on miners a uniform cumulative rate of what was described as "mineral rent". By contrast, the plaintiffs relied upon the same provisions to submit that mining profit was not taxed at a uniform MRRT rate. The plaintiffs sought to demonstrate this mathematically. If the only MRRT allowance a miner had was a royalty allowance, the equation stated in s 10-5 ("MRRT liability = MRRT rate x (Mining profit – MRRT allowances)") could be rendered as "MRRT liability = (22.5 per cent x mining profit) – (22.5 per cent x royalty credit divided by 22.5 per cent)". That is, the plaintiffs submitted, "MRRT liability = (22.5 per cent x mining profit) – royalty credit". It followed, so the plaintiffs submitted, that in substance the MRRT liability was imposed on miners at different rates. The plaintiffs further submitted that the equations described also revealed that the "effective rate" of MRRT liability varied from State to State depending upon the amount paid for State royalty. That "effective rate" was to be calculated, the plaintiffs argued, by expressing the amount of MRRT liability as a percentage of the mining profit. The Commonwealth submitted that the MRRT Legislation did not prescribe or make any assumption about the amount or rate of royalty paid by a miner to a State and that any difference in State mining royalties is a consequence, not of the MRRT Legislation, but of the laws of the several States. Accordingly, so the Commonwealth submitted, the MRRT Legislation did not discriminate between States because it applied the same rules "throughout the Commonwealth even though, by reason of circumstances existing in one or other States, it may not operate uniformly" [161] The Commonwealth submitted, in effect, that to speak, as Queensland had in its submissions, of a single equalised "mineral rent" throughout the Commonwealth was to introduce irrelevant considerations into the debate about the validity of the MRRT Legislation. While economists might be disposed to speak of the taxes and royalties imposed by different polities as all being species of a genus identified as "economic rent", it is critical to the debate about validity to observe not only that the charges are imposed by different polities but also that there are important differences between the two imposts. Royalties can be seen as [162] As to the plaintiffs' argument that the effective rate of the MRRT is not a uniform 22.5 per cent but is dependent upon the amount of royalty payments, the Commonwealth submitted that the assumption that royalty allowance would be the only MRRT allowance to be subtracted from mining profit is unrealistic. It is not necessary to explore that issue. More importantly, the Commonwealth submitted that the MRRT Act itself created no difference based on State locality.

Earlier decisions about s 51(ii)

There are relatively few decisions about the meaning and application of the limiting words of s 51(ii). The effect of those decisions may be described generally as being that discrimination has been found only when the relevant Act provided for the application of different rules according to locality and has not been established by showing only that application of the Act's provisions yields an assessment which would have been different if, by operating elsewhere, the taxpayer would have incurred different outgoings. It is, however, necessary to say something about the principal decisions. It is convenient to deal with them chronologically.

Colonial Sugar Refining Co Ltd v Irving

Section 4 of the Excise Tariff 1902 (Cth) provided that the time of the imposition of uniform duties of excise was 8 October 1901 at 4.00 pm "reckoned according to the standard time in force in the State of Victoria", and that "this Act shall be deemed to have come into operation at that time". The Act imposed a uniform excise duty on, among other products, manufactured sugar. Section 5 imposed duty on all dutiable goods which were manufactured or produced after the time when the duties were deemed to have been imposed, and also imposed duty on certain dutiable goods manufactured or produced before that time. The effect of the Excise Tariff 1902 was to exempt from duty goods on which excise duties had been paid under State legislation. The scale of State duties differed between the States. In Queensland, no excise duty was imposed on sugar. The Colonial Sugar Refining Company Limited argued that the Excise Tariff 1902 was a law with respect to taxation which discriminated between States. The argument was rejected by the Full Court of the Supreme Court of Queensland [163] [164] [165] 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" (emphasis added). Likewise, in the Full Court, Griffith CJ had concluded [166] [167] [168]

R v Barger

In R v Barger [169] Excise Tariff 1906 (Cth), under which goods manufactured by persons who observed federally prescribed award conditions were exempt. The award conditions differed from State to State according to local circumstances. Whether goods were dutiable therefore depended upon the person's compliance with the prescribed conditions of employment. The Act was held to be invalid. Barger was decided in accordance with the then accepted doctrine of reserved State powers [170] Colonial Sugar Refining and not affected by reserved powers reasoning. Whether the application of those principles required the conclusion that the impugned legislation was invalid divided the Court in Barger. And in Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd [171] Barger was wrong and inconsistent with the reasoning of the Court in Cameron v Deputy Federal Commissioner of Taxation [172] Barger was right. Much emphasis was given in argument in this matter to a passage taken from the reasons of the majority in Barger which dealt with the advice of the Privy Council in Colonial Sugar Refining. Their Honours said [173] Colonial Sugar Refining that "the discrimination, if any, was not effected by the Act imposing the Excise duty, but by the operation of the State laws previously existing". Their Honours went on to say [174]

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

The plaintiffs and Queensland argued that the MRRT Legislation presents this converse case. They submitted that the amount payable as MRRT varied in inverse proportion to the royalties in the several States "so as to make the actual incidence of the burden [of Commonwealth and State taxation on miners] practically equal".

The converse case postulated in Barger must be understood in light of all that was said in the reasons of Griffith CJ, Barton and O'Connor JJ. Their Honours recognised the great differences that can be seen between different parts of Australia. They said [175]

"The fact that taxation may produce indirect consequences was fully recognized by the framers of the Constitution. They recognized, moreover, that those consequences would not, in the nature of things, be uniform throughout the vast area of the Commonwealth, extending over 32 parallels of latitude and 40 degrees of longitude. The varying conditions of climate – tropical, sub-tropical and temperate – and of locality – near or at great distances from the seaboard – make an effectual discrimination for many purposes between the several portions of the Commonwealth."

Yet, despite these differences, the Constitution provides legislative power with respect to taxation "but so as not to discriminate between States or parts of States". As the majority said[176], those words "recognize the fact that nature has already discriminated, and prescribe that no attempt shall be made to alter the effect of that natural discrimination". In particular, as their Honours recognised[177], those words prohibit the Parliament from seeking to "bring about equality in the incidence of the burden of taxation, or what has been called an equality of sacrifice", by discriminating between the several portions of the Commonwealth.

The converse case which the majority postulated in Barger was a case of the kind just described. That is, their Honours were referring to a hypothetical case in which the Parliament, instead of enacting the Excise Tariff 1902 considered in Colonial Sugar Refining, had enacted a tariff which provided that the amount of duty payable to the Commonwealth should be so much as, when added to the State tax paid on that sugar, would make equal throughout the Commonwealth the actual amount of tax paid on sugar by every manufacturer of that commodity. But, as is explained later in these reasons, the converse case postulated by the majority in Barger is not this case. Any discrimination between miners is not effected by the MRRT Legislation but by the operation of State laws.

Cameron v Deputy Federal Commissioner of Taxation

The Income Tax Regulations 1917 (Cth) provided that the "fair average value" of certain livestock to be taken into account in assessing the amount of a taxpayer's assessable income should be the values set out in a table. The table provided different values for the same kind of livestock in different States and, in Western Australia, for the same kind of livestock in different parts of the State. In Cameron [178] [179]

Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd and W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW)

Commonwealth Acts imposed taxes on flour and wheat and provided for grants to States to be used to assist wheat growers. Because very little wheat was grown in Tasmania, and Tasmanians would bear the excise duty on flour by paying higher prices for bread and similar products, special provision was made for Tasmania. Section 14 of the Wheat Industry Assistance Act 1938 (Cth) provided that the Minister might make an additional grant to Tasmania not greater than the amount by which the tax raised in Tasmania under the Flour Tax (Wheat Industry Assistance) Assessment Act 1938 (Cth) exceeded the total amount paid to the State under the Wheat Industry Assistance Act. It was alleged that the Act imposing the tax discriminated between States. While a majority of this Court [180] [181] [182] An appeal to the Privy Council failed [183] [184] [185] Barger [186] merely because it is locality, and because it is a particular part of a particular State" (emphasis added). "It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities" [187]

Conroy v Carter

Section 5 of the Poultry Industry Levy Collection Act 1965 (Cth) provided for the Commonwealth to make an arrangement with a State for the State Egg Board to collect the levy imposed by that Act on behalf of the Commonwealth. Section 6(1)(a) of the Act provided that, while an arrangement made under s 5 remained in force, payments of the levy were to be made to the State Egg Board. Section 6(1)(b) permitted the State Egg Board to retain, out of any moneys payable by the Board to any person, an amount not exceeding the amount of any levy that the person was liable to pay. In Conroy v Carter [188] Barwick CJ, McTiernan and Menzies JJ were of the opinion that s 6(1)(b) discriminated between States. Menzies J described [189] [190] [191] Constitution [192] [193] [194]

Different "effective" MRRT rates?

It is not right to say, as the plaintiffs did, that "in terms" the MRRT Legislation imposes a tax calculated at a rate that differs from State to State. The amounts on which MRRT is levied will differ between different miners. If one of those miners had conducted identical operations in a different State, the amount on which MRRT would be levied would be different. The miner would have different outgoings, including a different outgoing for State royalties. But the rate at which the tax would be levied would remain 22.5 per cent, regardless of the State in which the miner operated. The plaintiffs submitted calculations directed to showing that the "effective" rate of MRRT imposed on a miner depended upon the amount of State royalty paid by that miner. The plaintiffs argued that, because the "effective" rate of MRRT depended upon the amount of State royalty paid, the MRRT Legislation discriminated between States by imposing different rates of tax according to locality. The utility and relevance of the calculations and comparisons advanced by the plaintiffs depended upon the manner of their calculating the "effective" rate of MRRT. The central fallacy in the calculations was that each took as the base for the calculation of an effective rate of MRRT the amount of a miner's "mining profit". It will be recalled that s 10-5 of the MRRT Act required calculation of a miner's mining profit as the first step along the way to determining the miner's MRRT liability. But from the miner's mining profit there must be deducted the miner's MRRT allowances (including royalty allowances) before arriving at the sum on which MRRT is payable. It is neither useful nor relevant to consider any comparison made between the proportion of two different miners' mining profit which is payable as MRRT. That comparison is neither useful nor relevant because it does not take the amount on which MRRT is levied as the basis for comparison. Discrimination is not revealed by making the comparison advanced by the plaintiffs based on only one of the several integers used to calculate the amount on which MRRT is levied.

Discrimination

As five members of this Court pointed out in Bayside City Council v Telstra Corporation Ltd [195] "[d]iscrimination is a concept that arises for consideration in a variety of constitutional and legislative contexts". Thus, s 102 of the Constitution provides power for the Parliament "by any law with respect to trade or commerce [to] forbid, as to railways, any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State" (emphasis added). Section 117 provides that "[a] subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State" (emphasis added). Section 99 does not use the word "discrimination" but does provide that "[t]he 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" (emphasis added). As the plurality also pointed out in Bayside City Council [196] why some distinction is discerned in the relevant treatment of, or outcome for, the subject of the alleged discrimination. Whether, or to what extent, these notions may apply in connection with constitutional provisions other than s 51(ii) need not be, and is not, examined here. But it is necessary to exercise some care in determining whether, or to what extent, these are notions that can have a direct or immediate application in connection with s 51(ii). In that regard, it is relevant to notice that s 51(ii) "with its prohibition of discrimination may not be the same as art 1, s 8 of the Constitution of the United States requiring uniformity" [197] Quick and Garran said [198] s 51(ii) that "[t]o discriminate obviously means to make differences in the nature, burden, incidence and enforcement of taxing law; to impose a high tax on commodities or persons in one State and a low tax on the same class of commodities or persons in another State, would be to discriminate". This understanding of "discriminate" accords with its basic dictionary meaning: "[t]o make a distinction; to perceive or note the difference (between things)" [199] s 51(ii) speaks of a law with respect to "taxation; but so as not to discriminate between States or parts of States", it is speaking of a law with respect to taxation which does not, in its terms, draw any distinction between States or parts of States. Regardless of what differences can be perceived between States or parts of States, a law with respect to taxation may itself make no distinction between them, whether by reference to differences that have been or could be perceived, or otherwise. That is, adopting the words quoted earlier from Quick and Garran, the limiting clause of s 51(ii) prevents the enactment of laws which "make differences in the nature, burden, incidence and enforcement of taxing law" (emphasis added).

Discrimination in effect?

Many of the submissions made by the plaintiffs and Queensland took as their premise that the MRRT Legislation sought to make the tax burden on miners equal throughout the federation. That is, it was submitted that the MRRT Legislation imposed a uniform cumulative rate of "mineral rent" throughout the Commonwealth which discriminated between the States by equating the "sacrifice" of miners in low royalty States with that of miners in high royalty States. The plaintiffs and Queensland thus submitted that, in effect if not in form, the MRRT Act was the converse case postulated by the majority in Barger because the royalty provisions of the MRRT Act sought to equalise the total tax "take" from miners by the federal and State governments. But unlike the converse case considered in Barger, the MRRT Act does not provide for any difference in MRRT liability according to where the miner operates. To the extent that the amount of MRRT paid varies from State to State because different rates of State royalty are charged, those variations are due to the different conditions that exist in the different States and, in particular, the different legislative regimes provided by the States. Other submissions of the plaintiffs and Queensland took as their premise that the MRRT Legislation treated equals unequally and, on that account, was discriminatory. More particularly, those submissions proceeded from the premise that s 51(ii) should be read as preventing the enactment of a law with respect to taxation which has different economic or other consequences in different States. And the plaintiffs argued that the MRRT Legislation discriminates against those States which wished to consider lowering their State royalty rates. None of these propositions is consistent with any of the cases that have been decided about s 51(ii), and that is reason enough to reject each of them. All of Colonial Sugar Refining, Barger, Cameron, Moran and Conroy require their rejection. It is, however, desirable to say more about why bare demonstration of different consequences in different States does not show that a law with respect to taxation discriminates between States or parts of States.

Different consequences in different States

As already noted, the limiting words of s 51(ii) do not speak of a law that discriminates against States or parts of States and should be read as referring to geographic differentiation, not to the effect of the relevant law on a State as a polity. To discriminate against someone or something is "to make an adverse distinction with regard to; to distinguish unfavourably from others" [200] Discrimination connotes comparison [201] [202] [203] In applying the limitation contained in s 51(ii), there is no question about selecting an appropriate comparator. Section 51(ii) expressly provides for the comparison that must be made. Does the impugned law discriminate between States or parts of States? Section 51(ii) thus provides that, whatever differences may be observed between States or parts of States, a law of the Parliament with respect to taxation may itself neither create nor draw any distinction between States or parts of States. In that sense, at least, the prohibition which the qualifying words of s 51(ii) provide is cast in absolute terms. The power to make a law with respect to taxation may not be exercised so as to discriminate. By contrast, as noted earlier, s 102 gives power to the Parliament, by any law with respect to trade or commerce, to forbid, as to railways, "any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State" (emphasis added), when "due regard" is had to certain matters. Section 51(ii) uses no qualifying words like "undue", "unreasonable" or "unjust". It erects a rule expressed simply as "so as not to discriminate" (emphasis added). In its terms, then, s 51(ii) may be read as assuming that there are no differences between States (or parts of States) which could warrant a law with respect to taxation distinguishing between them. An assumption of that kind would fit comfortably with the limiting words of s 51(ii) fulfilling a fundamental federal purpose: that laws with respect to taxation enacted by the federal Parliament treat all States and parts of States alike. If this is the assumption that underpins s 51(ii), it would follow that, if a law with respect to taxation does discriminate between States (or parts of States), no further question could arise about whether the distinction that the law created or drew might none the less be explained or justified in a way that would take the challenged law outside the qualifying words of the provision. And if no further question of that kind need be answered, there would be no occasion to identify or consider the relationship that the law may have with some object or end which is identified as "proper" or "legitimate", because there could be no object or end that could constitute or reflect some difference between States (or parts of States) which would justify distinguishing between them. It is not necessary, however, to decide in this matter whether s 51(ii) should be understood as embodying or proceeding from an assumption of the kind described. The Commonwealth submitted that if, contrary to its principal submission, the MRRT Legislation "somehow had a relevant differential treatment or unequal outcome, it does not follow that the legislation is discriminatory between States". In support of that submission, the Commonwealth referred to the plurality's reasons in Austin, which noted [204] [205] where the differential treatment and unequal outcome is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective [206] Austin. And although the proposition was repeated in Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) [207] It may be accepted that consideration of whether a law discriminates between States or parts of States is not to be resolved by consideration only of the form of the law. The legal and practical operation of the law will bear upon the question. It by no means follows, however, that the law is shown to discriminate by demonstrating only that the law will have different effects on different taxpayers according to the State in which the taxpayer conducts the relevant activity or receives the relevant income or profit. In particular, a law is not shown to discriminate between States by demonstrating only that it will have a different practical operation in different States because those States have created different circumstances to which the federal Act will apply by enacting different State legislation. To the extent to which the plaintiffs' arguments depended upon the proposition that the federal legislative power to enact the MRRT Legislation was restricted because State Parliaments had made legislative provision for mining royalties which differed from State to State, the arguments must be rejected. Those arguments run counter to fundamental constitutional considerations. Central to the Australian federal system is "[t]he conception of independent governments existing in the one area and exercising powers in different fields of action carefully defined by law" [208] [209] Since Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' Case") [210] The MRRT Legislation does not discriminate between States. If the States had enacted no provision for royalties or if all States had chosen to exact royalties at identical rates, the plaintiffs' argument of discrimination would evidently be without foundation. The possibility that a law of the federal Parliament might become invalid upon, and by reason of, one State changing its royalty rate would not be consistent with the observations of Griffith CJ in Colonial Sugar Refining [211] much less the decision in the Engineers' Case [212] The plaintiffs and Queensland rightly accepted that a federal taxing Act permitting deduction from the amount on which the tax was to be levied of expenses actually and necessarily incurred in conducting a business was not shown to be discriminatory by showing only that one of those expenses was a compulsory State exaction, the amount of which varied between the States. The MRRT Act's provisions about State royalties are different in their form, and thus their application, from provisions for deduction from taxable income commonly found for many years in Commonwealth income tax Acts. Those differences in form and application are not constitutionally relevant. Neither income tax Act provisions permitting deduction of State taxes from taxable income nor the royalty provisions of the MRRT Act discriminate between States.

Section 99

The plaintiffs accepted that, if the MRRT Legislation did not discriminate between States, it was not a "law ... of trade, commerce, or revenue" which gave "preference to one State or any part thereof over another State or any part thereof". In Permanent Trustee [213] [214] Permanent Trustee by reference to Elliott v The Commonwealth [215] [216] Elliott, the critical phrase in s 99, "give preference ... over", expresses "a conception necessarily indefinite". Much therefore depends upon the level of abstraction at which debate enters upon the issue. Second, and of most immediate relevance in this case, "[t]o give preference to one State over another State discrimination or differentiation is necessary" [217] [218] Because the MRRT Legislation does not discriminate between States, there is no preference of one State over another.

The Melbourne Corporation principle

The plaintiffs submitted that the States own the minerals in their lands and have the ability to regulate extraction of those minerals on terms that the persons granted the right to take minerals pay in return royalties fixed by the States at whatever level the States choose. The plaintiffs submitted that the MRRT Legislation interfered with the States' management of the mineral resources under their control. The colony's control over minerals was recognised in the pre-federation constitutions of Queensland and Western Australia [219] Constitution itself, which, by s 106, continued the State constitutions in force (but subject to the Constitution) [220] The plaintiffs' argument began with a passage from the judgment of Starke J in Melbourne Corporation [221]

"[I]n the end the question must be whether the legislation or the executive action curtails or interferes in a substantial manner with the exercise of constitutional power by the other. The management and control by the States and by local governing authorities of their revenues and funds is a constitutional power of vital importance to them. Their operations depend upon the control of those revenues and funds. And to curtail or interfere with the management of them interferes with their constitutional power."

The plaintiffs submitted that the infirmity of the MRRT Legislation was revealed by substituting "natural resources" for "revenues and funds" in the passage just set out.

The plaintiffs further submitted that a State is necessarily both a territorial entity and a polity with responsibility for the management and control of the waste lands of the Crown and is expressly given the right to appropriate the proceeds of sale and revenues from such land, including royalties, mines and minerals in such lands [222] The Commonwealth did not dispute that each State's ownership, management and control of its territory (including, particularly, the waste lands of the Crown within that territory) is a necessary attribute of statehood and that a State's ability by legislation to make laws to promote the development of its territory in the interests of, or to promote the welfare of the community of, the State is important. And the Commonwealth did not dispute that it is for the States to determine the level of royalty to be paid as the price for extracting minerals from their territories. But the Commonwealth submitted that the MRRT Legislation does not subject that ability to Commonwealth control and proceeded on the assumption that the States were free to fix royalties as they chose. In Melbourne Corporation, Dixon J said [223]

"The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities."

And as was said in the Work Choices Case[224], the separate polities whose continued existence is predicated "are to continue as separate bodies politic each having legislative, executive and judicial functions". Hence, as the decisions in Austin[225] and Clarke[226] each demonstrate, the Melbourne Corporation principle requires consideration of whether impugned legislation is directed at States, imposing some special disability or burden on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments.

The extent and importance of the States' function of managing their lands and mineral resources must be acknowledged. But the plaintiffs' submissions contended for a view of the Melbourne Corporation principle which, if accepted, would subvert not only the position established by the decision in the Engineers' Case but also s 109 of the Constitution. Western Australia submitted that it is "central to the capacity of [the] State to function as a government under the Constitution that it have the power to determine the most appropriate means of financing the development of communities in Western Australia". This submission bore a striking resemblance to arguments advanced by that State, and rejected, in Western Australia v The Commonwealth (Native Title Act Case) [227] [228] Native Title Act Case, that, because the "capacity and power to grant, regulate and otherwise deal with land and other resources in Western Australia ... is a fundamental sovereign function of the Government of Western Australia as a State", provisions of the Native Title Act 1993 (Cth) were invalid. But as the plurality held [229]

"The [Native Title Act] does not purport to affect the machinery of the government of the State. The constitution of the three branches of government is unimpaired; the capacity of the State to engage the servants it needs is unaffected; the acquisition of goods and services is not impeded; nor is any impediment placed in the way of acquiring the land needed for the discharge of the essential functions of the State save in one respect, namely, the payment of compensation. The Act does not impair what Dawson J described [in Queensland Electricity Commission v The Commonwealth [230]

If the MRRT Legislation does affect the States' control over land and resources, the effect is less direct and more speculative than the effect of the Native Title Act. If, then, the MRRT Legislation does diminish the choices available to the executive governments of the States, that diminution does not engage the Melbourne Corporation principle. In Austin, the plurality noted [231] Melbourne Corporation principle "has proved insusceptible of precise formulation". Accordingly, the plurality warned [232] In Austin and Clarke, the perceived vice of the Commonwealth law in question lay in its impact upon the capacity of a State to fix the terms of its relationships with its judiciary and legislature as branches of the government of that State. As had previously been pointed out, in Re Australian Education Union; Ex parte Victoria [233] The legislation held invalid in Queensland Electricity Commission [234] Pay-roll Tax Case [235] all employers (including the States) was held to be valid even though, of course, it placed a burden on the States. The MRRT Legislation is not aimed at the States or their entities as was the legislation considered in each of Melbourne Corporation, Queensland Electricity Commission, Austin and Clarke. The MRRT Legislation does not impose any special burden or disability on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments. The MRRT Legislation does not deny the capacity of any State to fix the rate of royalty for minerals extracted by miners, and no burden upon a State attaches to any decision by the State to raise or lower that rate. If, as the plaintiffs asserted, the MRRT Legislation affects the States' ability to use a reduction in royalty rate as an incentive to attract mining investment in the State, the MRRT Legislation does not impose any limit or burden on any State in the exercise of its constitutional functions.

Section 91

Section 91 of the Constitution provides that:

"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."

It was common ground that the plaintiffs engaged in mining for iron ore and that iron ore is an "other metal" within s 91.

Conclusion and orders

For these reasons, the plaintiffs' challenges to validity are not made out. The plaintiffs should pay the costs of the reserved questions. The questions reserved for the opinion of the Full Court should be answered as follows:

(i) Are any or all of s 3 of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), s 3 of the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth) and s 3 of the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) invalid in their application to the plaintiffs on one or more of the following grounds:

they discriminate between the States of the Commonwealth of Australia contrary to s 51(ii) of the Constitution; they give preference to one State of the Commonwealth of Australia over another State contrary to s 99 of the Constitution;

they so discriminate against the States of the Commonwealth or so place a particular disability or burden upon the operations or activities of the States, as to be beyond the legislative power of the Commonwealth?

Answer: No.

(ii) Are any or all of the Minerals Resource Rent Tax (Imposition—Customs) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—Excise) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition—General) Act 2012 (Cth) and the Minerals Resource Rent Tax Act 2012 (Cth) invalid in their application to the plaintiffs on the ground that they are contrary to s 91 of the Constitution?

Answer: No.

(iii) Who should pay the costs of the reserved questions?

Answer: The plaintiffs.

Further p