Mineral Resource Rent Tax

Mineral Resource Rent Tax

The Minerals Resource Rent Tax (MRRT) is a proposed tax on profits generated from the exploitation of non-renewable resources in Australia.[1] It is the replacement for the proposed Resource Super Profit Tax (RSPT).

The tax, levied on 30% of the "super profits" from the mining of iron ore and coal in Australia, is proposed to be introduced from 1 July 2012.[1] The RSPT was initially announced as part of the initial response to the Australia's Future Tax System review, known as the Henry Tax Review, by the Treasurer, Wayne Swan and the then Prime Minister, Kevin Rudd. The tax is similar in concept, although different in operation, to the existing Petroleum Resource Rent Tax levied on off-shore petroleum extraction activities.

The RSPT was to be levied at 40% and applied to all extractive industry including gold, nickel and uranium mining as well as sand and quarrying activities. The tax was replaced by the MRRT following the appointment of Julia Gillard as Prime Minister of Australia in late June 2010.[2]

The controversy regarding the RSPT was such that an "ad war" between the government and mining interests began in May 2010[3] and continued until the downfall of Prime Minister Kevin Rudd in June 2010.[4] The Australian Electoral Commission released figures indicating mining interests had spent $22m in campaigning and advertisements in the six weeks prior to the end of the Rudd prime ministership.[5]

Mining interests re-introduced the ads arguing against the proposed revised changes during the 2010 federal election campaign.[6]

Contents

Mining industry and political response

The response to the MRRT was mostly divided into supporter and opposer groups consisting of Federal government and opposition parties, lobby groups and the various stakeholders.

Advertisements

Advertisements supporting or attacking the proposed tax ran on commercial television and in major newspapers. Funding for the mining lobby's advertisements came from the largest resource companies[citation needed] whilst funding for the Federal government's advertisements came from the consolidated revenue fund.[citation needed] Julia Gillard ceased the government's advertising after becoming prime minister and the mining lobby ended their ads shortly thereafter.

Effects and impacts

Opposition to the tax was cited by many commentators[who?] as one reason for the overthrow in June 2010 of the then Prime Minister, Kevin Rudd, replaced by his deputy, Julia Gillard. Soon after Gillard's appointment as Prime Minister, the Government reached an agreement with several of the largest mining firms on changes which were announced on 2 July 2010.[citation needed] Negotiations with smaller companies did not take place at this time.[citation needed]

The changes lead to a reduction in the amount of revenue expected to be raised by the tax and offsetting reductions in the tax breaks the MRRT will fund, for example; the proposed company tax reduction was halved due to the reduction in revenue to be collected from the tax, along with reductions in other areas.

Levy

The proposed tax will be levied on 30% of MRRT assessable profit, where assessable profit is defined as assessable receipts minus deductible expenditure (including an MRRT allowance). The MRRT allowance is proposed to be set at the long term government bond rate plus 7% (700 basis points). Projects will also be eligible for a 25% extraction allowance, which reduces the effective statutory tax rate to 22.5%. State royalties will be deductible for MRRT purposes, and MRRT payments will be deductible for company income tax purposes.

Unlike the proposed RSPT system, the MRRT will not see the Commonwealth Government refund a portion of project losses.

References

External links



Wikimedia Foundation. 2010.

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