Magazine article Financial Management (UK)

Opinion: Two Botched Efforts to Extract Tax Revenue from the Mining Industry Will Not Have Helped the Australian Labor Party's Chances in This Month's Election, Writes Sarah Thompson

Magazine article Financial Management (UK)

Opinion: Two Botched Efforts to Extract Tax Revenue from the Mining Industry Will Not Have Helped the Australian Labor Party's Chances in This Month's Election, Writes Sarah Thompson

Article excerpt

Australia's attempts to tax its miners' huge gains resulting from Asian demand in recent years have become a curse for its politicians. The ill-conceived resource super-profit tax (RSPT) broke Kevin Rudd's prime ministership in 2010, while the minerals resource rent tax (MRRT) was similarly damaging for his successor as Labor PM, Julia Gillard.

The MRRT created considerable global uncertainty as the share prices of Australia's resources companies--some of the biggest in world--were marked down after its implementation in July 2012. Only a meagre amount has been raised so far, suggesting that the cost of administering the tax could even exceed the revenue raised. In fact, the most significant impact of the MRRT, a tax on profits made from the extraction of non-renewable resources in Australia, is that it has created more jobs for accountants, who are needed to tackle its mind-numbing complexity.

A replacement for the RSPT, which was withdrawn just before its planned implementation, the MRRT is levied at 30 per cent of "super profits" gained from the mining of iron ore and coal. A company becomes liable when its annual profit reaches A$75m--a measure designed so as not to burden smaller players. Potentially, more than 300 firms could be affected. There is no time limit; the tax is there in perpetuity unless a future government decides to end it.

Rudd and his finance minister at the time, Wayne Swan, had announced the RSPT as part of their response to a wide-ranging review of the tax system chaired by Ken Henry, then secretary to the Treasury. The RSPT was to be levied at 40 per cent and to apply to all mining, including for gold, nickel and uranium. The planned measure was a key factor behind Rucld's downfall in June 2010. …

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