THE Federal Government is considering closing a loophole that allows state governments to hike mining royalties, which in turn reduces companies' mining tax liabilities.
A report in Fairfax newspapers indicated Treasurer Wayne Swan was considering tweaking the mining tax.
Under changes to Kevin Rudd's original mineral resources rent tax, mining companies can deduct all current and future royalties from their mining tax liability.
Since the change New South Wales and Queensland have raised royalty payments.
The mining tax failed to generate any revenue in the first quarter of the current financial year.
A Minerals Council of Australia spokesman warned the government against such a move, Fairfax reported.
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