Resource Super Profits Tax
Encyclopedia
The Minerals Resource Rent Tax (MRRT) is a proposed tax on profits generated from the exploitation of non-renewable resources in Australia. 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. 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.
The controversy regarding the RSPT was such that an "ad war" between the government and mining interests began in May 2010 and continued until the downfall of Prime Minister
Kevin Rudd
in June 2010. 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. Mining interests re-introduced the advertisments arguing against the proposed revised changes during the 2010 federal election campaign.
On the 23 November 2011, the tax passed through the lower house
with the support of the Greens. The bill is scheduled to be debated at the Senate
next year.
The tax was received support from the Australian Council of Trade Unions
, mining unions such as the Construction, Forestry, Mining and Energy Union
and conditional support from the Australian Greens
. Unlike the RSPT, mining companies BHP Billiton
and Rio Tinto Group
have not publicly opposed the MRRT
Those opposing the tax include the mining industry, resource and mining organisations such as Fortescue Metals Group
, Xstrata
and Hancock Prospecting
, mining lobby groups and the federal opposition (Liberal Party and National Party).
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. Negotiations with smaller companies did not take place at this time.
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.
Unlike the proposed RSPT system, the MRRT will not see the Commonwealth Government refund a portion of project losses.
, the bill was passed in the House of Representatives on 23 November 2011. The bill is slated to be debated at the Senate in 2012.
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. 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
Henry Tax Review
The Australia's Future Tax System Review, informally known as the Henry Tax Review was commissioned by the Rudd Government in 2008 and published in 2010...
, by the Treasurer
Treasurer of Australia
The Treasurer of Australia is the minister in the Government of Australia responsible for government expenditure and revenue raising. He is the head of the Department of the Treasury. The Treasurer plays a key role in the economic policy of the government...
, Wayne Swan
Wayne Swan
Wayne Maxwell Swan is the Deputy Prime Minister of Australia and an Australian politician. He has been an Australian Labor Party member of the Australian House of Representatives from 1993 to 1996, and then re elected in 1998 till today , representing the Division of Lilley, QLD...
and the then Prime Minister
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
, Kevin Rudd
Kevin Rudd
Kevin Michael Rudd is an Australian politician who was the 26th Prime Minister of Australia from 2007 to 2010. He has been Minister for Foreign Affairs since 2010...
. 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
Julia Gillard
Julia Eileen Gillard is the 27th and current Prime Minister of Australia, in office since June 2010.Gillard was born in Barry, Vale of Glamorgan, Wales and migrated with her family to Adelaide, Australia in 1966, attending Mitcham Demonstration School and Unley High School. In 1982 Gillard moved...
as Prime Minister of Australia
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
in late June 2010.
The controversy regarding the RSPT was such that an "ad war" between the government and mining interests began in May 2010 and continued until the downfall of Prime Minister
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
Kevin Rudd
Kevin Rudd
Kevin Michael Rudd is an Australian politician who was the 26th Prime Minister of Australia from 2007 to 2010. He has been Minister for Foreign Affairs since 2010...
in June 2010. The Australian Electoral Commission
Australian Electoral Commission
The Australian Electoral Commission, or the AEC, is the federal government agency in charge of organising and supervising federal elections and referendums. State and local government elections are overseen by the Electoral Commission in each state and territory.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. Mining interests re-introduced the advertisments arguing against the proposed revised changes during the 2010 federal election campaign.
On the 23 November 2011, the tax passed through the lower house
Australian House of Representatives
The House of Representatives is one of the two houses of the Parliament of Australia; it is the lower house; the upper house is the Senate. Members of Parliament serve for terms of approximately three years....
with the support of the Greens. The bill is scheduled to be debated at the Senate
Australian Senate
The Senate is the upper house of the bicameral Parliament of Australia, the lower house being the House of Representatives. Senators are popularly elected under a system of proportional representation. Senators are elected for a term that is usually six years; after a double dissolution, however,...
next year.
Mining industry and political response
The response to the MRRT was mostly divided into supporter and opposition groups consisting of Federal government and opposition parties, lobby groups and the various stakeholders.The tax was received support from the Australian Council of Trade Unions
Australian Council of Trade Unions
The Australian Council of Trade Unions is the largest peak body representing workers in Australia. It is a national trade union centre of 46 affiliated unions.-History:The ACTU was formed in 1927 as the "Australian Council of Trade Unions"...
, mining unions such as the Construction, Forestry, Mining and Energy Union
Construction, Forestry, Mining and Energy Union
The Construction, Forestry, Mining and Energy Union is Australia's main trade union in construction, forestry and furnishing products, mining and energy production....
and conditional support from the Australian Greens
Australian Greens
The Australian Greens, commonly known as The Greens, is an Australian green political party.The party was formed in 1992; however, its origins can be traced to the early environmental movement in Australia and the formation of the United Tasmania Group , the first Green party in the world, which...
. Unlike the RSPT, mining companies BHP Billiton
BHP Billiton
BHP Billiton is a global mining, oil and gas company headquartered in Melbourne, Australia and with a major management office in London, United Kingdom...
and Rio Tinto Group
Rio Tinto Group
The Rio Tinto Group is a diversified, British-Australian, multinational mining and resources group with headquarters in London and Melbourne. The company was founded in 1873, when a multinational consortium of investors purchased a mine complex on the Rio Tinto river, in Huelva, Spain from the...
have not publicly opposed the MRRT
Those opposing the tax include the mining industry, resource and mining organisations such as Fortescue Metals Group
Fortescue Metals Group
Fortescue Metals Group is an Australian iron ore mining company. The company has holdings of more than 87,000 km² in the Pilbara region of Western Australia making it the largest tenement holder in the state. It is listed as FMG on the Australian Securities Exchange .In 2008, the group loaded...
, Xstrata
Xstrata
Xstrata plc is a global mining company headquartered in Zug, Switzerland and with its registered office in London, United Kingdom. It is a major producer of coal , copper, nickel, primary vanadium and zinc and the world's largest producer of ferrochrome...
and Hancock Prospecting
Hancock Prospecting
Hancock Prospecting is a Western Australian mining company chaired by Gina Rinehart the daughter of Lang Hancock. At stages of its trading it has been known as Hancock Prospecting Ltd, Hancock Resources, Hanwright Pty Ltd, Hancock & Wright Ltd, and Hancock Prospecting Pty. Ltd.The Hancock Group of...
, mining lobby groups and the federal opposition (Liberal Party and National Party).
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 whilst funding for the Federal government's advertisements came from the consolidated revenue fund. 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 as one reason for the overthrow in June 2010Australian Labor Party leadership election, 2010
A leadership election of the Australian Labor Party was held on 2010. The Prime Minister of Australia, Kevin Rudd, was challenged by the Deputy Prime Minister of Australia, Julia Gillard, for the leadership of the party, and therefore the prime ministership, since the ALP has held a majority in...
of the then Prime Minister, Kevin Rudd
Kevin Rudd
Kevin Michael Rudd is an Australian politician who was the 26th Prime Minister of Australia from 2007 to 2010. He has been Minister for Foreign Affairs since 2010...
, 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. Negotiations with smaller companies did not take place at this time.
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.
Passing of the Bill
With the support of The Greens and independent MP Andrew WilkieAndrew Wilkie
Andrew Damien Wilkie is an Australian politician and independent federal member for Denison...
, the bill was passed in the House of Representatives on 23 November 2011. The bill is slated to be debated at the Senate in 2012.