Australia has had a Petroleum Resource Rent Tax since 1987: why the concern about a proposed 'Mineral Resource Rent Tax'?
The Australian Government introduced a resource rent tax on offshore oil and gas deposits in 1984 and since then it has raised in excess of an additional $1 billion a year in revenue over and above the normal company tax on income1. At the time it was being introduced a great deal of controversy followed the proposed introduction of the resource rent tax. The Petroleum Resource Rent Tax (PRRT) was introduced by the Petroleum Resource Rent Tax Act 1987 (Cth) and is imposed on the profit at the rate of 40 percent. The Petroleum Resource Rent Tax Assessment Act 1987 (Cth) contains the provisions relating to the calculation of the profit subject to the rent tax. The Australian government proposes to introduce a Mineral Resource Rent Tax (MRRT) on iron ore, coal and gas from coal seams. Oil companies currently under the PRRT regime have the option of being taxed under the proposed MRRT instead of the current PRRT if they so desire. The proposed MRRT has been met with criticism from certain mining companies and noted economists2. However, Australia currently has a budget deficit and a MRRT is being viewed by the government as being a solution to repaying government debt. A Resource Rent Tax (RRT) has been used by a number of countries such as the United Kingdom and Norway to increase government revenue from their 'North Sea' oil reserves. This paper will address the question raised above, why is the proposed MRRT being subject to criticism in Australia? The paper will start with an introduction on resource rent taxes and their current use by different governments. The second part of the paper will commence with a discussion of the philosophical basis for the imposition of an extra tax on the taxable profit from minerals. The third part of the paper will examine the current PRRT as well as a discussion of the proposed MRRT. The fourth part of the paper will then examine the variety of taxes being used by other governments to raise additional revenue from mining activities.