New Resources Tax in AUstralia ( MRRT) and it's effects on Australian mining companies - Essay Example

MRRT Mineral Resource Rent Tax and its Effects on Australian Mining Industries The stability of Australia’s annual $A40 billion mining industry, including its globally pioneering technology and workforce, faces risk if the government continues to implement higher tax rates on the industry to subsidise the expansion of other business sectors (Austmine Board denounces Resource Rent Tax 2010). The introduction of the MRRT or Minerals Resource Rent Tax, which will take effect in 2012 (Taylor 2010) has considerable repercussions on the country’s economy, financial plans, employment and investment in its mining industry and for Australia’s mining states like Western Australia, Queensland, and New South Wales (Senate Select Committee on Fuel and Energy 2010).

The Gillard Government’s proposed resource tax gained high approval from the International Monetary Fund, quoting it as a “step in the right direction.” Moreover, the MRRT would achieve the nation’s trust for consumption-based taxes and abolish ineffective taxation (Landers 2010). Because the MRRT is liable only to mining companies of iron ore, coal, oil and gas, there will be a reduction of the figure of affected companies from the previous 2,500 taxpayers to approximately 320 (Cherrington 2010).

Taxpayers with annual income of no more than $A50 million will be exempted from the MRRT (Minerals Resource Rent Tax Regime n.d.)MRRT’s Possible Impact on Future Investment in Australia’s Mining Industry-The proposed MRRT promises an optimistic stride for mining investments in Australia. It offers a better guarantee for up-and-coming mining ventures, particularly those in the non-production of iron ore, coal, oil and gas.- Negotiations with the three mining giants of Australia, namely the BHP, Rio Tinto andXstrata guarantee that the growth of the postponed projects due to the RSPT or Resource Super Profits Tax of the previous government would push through.

-For companies in mining ventures, the determination of taxable resource and revenues will be based solely on the nearest point to extraction as possible. This change would not deter the companies from their capital cost recovery and internal return rate. -Resulting from all positive changes under the MRRT regime, mining companies would be able to raise funds for upcoming projects.-The key adjustments from RSPT to MRRT in tax rates, particularly the 40% tax reduced to 22.5% rate and the resulting beneficial impacts on the projected efficient tax rates is forecasted to boost global competitiveness (Minerals Resource Rent Tax replaces RSPT 2010).

Unjust Competitive Advantage to Australia’s Mining GiantsThe three pioneer mining companies in Australia: BHP, Rio Tinto and Xstrata equally agreed on a non-permission of the Australian tax to implement a target that could impact their multi-national operations. Their joint apprehensions over fluctuation on international shares and financial markets, whereupon loans are made to fund their projects, strengthened their vigilance on impending tax hikes by the government (Head 2010).The government negotiated exclusively with the three mining firms, granting them an unjust competitive lead over the smaller mining companies.

It should, however, be taken into consideration that the interests of large-scale mining companies are different from the smaller companies’ interests. The government did not act on public interest but on its political interest instead. In so doing, BHP, Rio Tinto and Xstrata were given full accessibility to the government’s internal operation and private information on the MRRT. The three mining giants were likewise granted a direct control over the MRRT blueprint which saddened and disadvantaged the small-scale mining companies.

A total disregard of the government’s duty to provide basic information on tax policies created uncertainties on the future stability of the small companies. This supposedly avoidable failure and negligence by the Gillard Government would eventually lead to a possible reduction of investments in the future (Senate Select Committee on Fuel and Energy 2010). ReferencesAustmine Board denounces Resource Rent Tax (2010), Australian Journal of Mining. Retrieved October 26, 2010 from http://www.theajmonline.com.au/mining_news /news/2010/may/may-06-10/top-stories/austmine-board-denounces-resource- rent-taxCherrington, J. (2010). Goodbye Resource Super Profits Tax, hello Mineral Resource Tax.

Mallesons Stephen Jaques. Retrieved October 26, 2010 from http://www.mallesons.com/publications/2010/Jul/10400570W.htm Head, M. (2010). Australia: Mining magnates ramp up demands on Gillard Government. World Socialist Web Site. Retrieved October 26, 2010 from http://www.wsws.org/articles/2010/jun2010/forr-j30.shtmlLanders, K. (2010). IMF backs resources tax. ABC News. Retrieved October 26, 2010 from http://www.abc.net.au/news/stories/2010/09/30/3025614.htm Minerals Resource Rent Tax Regime (n.d.).

Future Tax. Retrieved October 27, 2010 from http://www.futuretax.gov.au/pages/resourcetax_MRRT.aspxMinerals Resource Rent Tax replaces RSPT (2010). Clayton Utz. Retrieved October 26, 2010 from http://www.claytonutz.com/publications/news/201007/06/minerals _resource_rent_tax_replaces_rspt.pageSenate Select Committee on Fuel and Energy (2010). Parliament of Australia. Retrieved October 26, 2010 from http://www.aph.gov.au/Senate/committee/fuelenergy _ctte/second_interim/b02.htmTaylor, R. (2010).

FACTBOX – Australia’s new resource tax explained. HY Markets. Retrieved October 27, 2010 from http://www1.hymarkets.com/ennews/displayallnews.hyml?methodname=link&_id=1547565