Issues in Australasian Mining Taxation: The Arguments For and Against Res urce Rent Taxation

Resource rem taxation systems are based on me concept mat the resource owner or gov ernment should receive a propo rtion of the economic ren t or surpl us profit generated by a primary productive activity. Economic rent has been defined as additional profi ts in excess o f the m inimum rate of return necessary to attrac t new investment in to an industry sector. Resource rem taxation schemes for the mining industry have been widely discussed and in some cases implememed over the past 20 years. The main objective of re source rem taxation has been to im plement a royalty or taxation system which gives to government a higher retu rn from more profitable mines wi thout adversely affecting marginal mines or inhibiting investment in new mmes. The structu re of resou rce rem tax ation systems is discussed, with particular em pha sis on the parameters of accumulator rate, tax or royal ty ra te and deductible expenses. The application of the tax is examined by looking at the case in favour for imposition from the viewpoin t of the Resource Owner (governmen t) an d the mine operato r. Like wise, the case against this system is analysed from the tax co ll ector's (governmem or governments) po im of view an d that of the mme operator. It is concluded that ne utrali ty of the tax on investment decision-making may be compromised when the possible negative effects on exploration and research and de velopment and meir impact on overall min ing company perfo rmance are considered. Any application of the tax on existing op erations is likely to be complex and costly for both governments and co mpanies. However, successful applica tion to green fiel ds developments has been demonstrate