The tale of two taxes : a study of mineral and petroleum resource taxation in Australia

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The attempt by the Australian Government to impose a new mineral resource super profits tax in 2010 attracted hostility from industry and state governments, split political parties, and perturbed the general public, and following an intense debate that contributed to the departure of a prime minister from office shortly before an election. The repeal in 2014 of the Mineral Resource Rent Tax (MRRT) left the country with few financial savings to show from the largest ever mineral resource boom in Australia, yet in 2012 a similar tax spread from the offshore oil and gas fields to onshore petroleum projects with industry backing and bipartisan political support. This tax remains in place. This study’s main research question is: ‘Why were there different outcomes for the MRRT and the onshore extension of the Petroleum Resource Rent Tax (PRRT) when they were both based on the same economic theory?’ The MRRT and onshore PRRT replaced the Resource Super Profits Tax (RSPT). The findings of this research show that the government had ignored warnings about the complexity of the tax design it adopted for the RSPT, which could have seen the government pay miners for losses in times of low commodity prices. The government failed to provide a coherent narrative about its RSPT and allowed too many concessions in the successive MRRT, and PRRT extension. The different outcomes for the MRRT and PRRT reflected the effectiveness of the campaign against the MRRT. The answers to the research question were done by a comparative case study of the MRRT and the onshore extension of the PRRT. The study adopted an agenda building framework that examined the policy positions of the then federal Labor Government and the resources sector, but this framework did not fully answer the question and a second framework based on regulatory capture was used to fully answer the question. Data for this research came from: interviews with key people involved in resource tax policy; a statistical analysis of taxes and royalties paid during the resource boom; and data analysis of policy documents, transcripts of parliamentary inquires and media reports. This thesis finds that any future debate on resource taxation must be accompanied by greater transparency on the payments made by resource firms to the governments of each jurisdiction they operate in.
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