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Killing the goose that laid the golden egg? Australia's resource policy regime in comparative perspective
Abstract
A common criticism of the minerals resource rent tax (MRRT) was that it would ‘kill the goose that laid the golden egg’ for the Australian economy. Mining companies, their industry associations, and the Liberal–National Coalition all argued the MRRT would reduce Australia's attractiveness for mining investment, and lead to ‘capital flight’ as resource firms shifted towards lower-taxing competitors. To evaluate this claim, it is necessary to compare Australia's resource policy regime – including, but not limited to, its taxation elements – against those of its principal competitors. This article undertakes such an evaluation by comparing Australian resource policies with those of nine of its major mineral and energy competitor countries. This survey reveals that Australia's comparatively high mining tax rates are partially offset by its ‘non-interventionist’ approach to resource policy, and that it has retained good rankings on international political risk surveys. There is some evidence of short-term market response to the mining tax, but there is little evidence of sustained capital flight occurring due to the MRRT. These data collectively suggest that the MRRT did not significantly undermine Australia's attractiveness for international mining investment, despite widespread perceptions to the contrary.
... The completion time entirely depends on the mining and processing methods, the size and location of the deposit, and the complexity of the operating and environmental licencing procedures. required to pay in most countries, generally at the same rate paid by other corporation (Wilson 2016). ...
... In a federal political system, the special mining taxes can be complicated due to the existence of multiple government objectives such as maximising government revenue, maximising mineral rents, tax revenue stability, and attracting mining investment under the control of mineral resources with provincial or state governments. 5 Mineral royalties may either be levied by two levels of government (such as Canada) or divided between governments based on a revenue sharing formula (in Brazil) (Wilson 2016). ...
... Fiscal policies can either increase tax subsidies or reduce tax rates and any variation of these policies can significantly change the mining investment decision. The imposition of tax credits or changes in tax rates is completely dependent on the regulatory decisions of the current economic climate (Wilson 2016). The researchers believe that the variation of tax systems such as The Mineral Resource Rent Tax (MRRT) or is best known as the proposed Resource Super Profit Tax (RSPT) in Australia in general has a significant impact on the mining investment decisions, rather than the imposition of tax credits (The Australian Government 2015). ...
Mining involves the discovery, extraction and processing of non-renewable resources. The potential of mining revenues to contribute to national economic development is well known, but the allocation of mineral wealth and the concern of increasing resource scarcity have become issues of debate in the mining industry. The purpose of this study is to introduce the binomial decision tree analysis, which is a new approach to mining investment decisions. The examples used examine the impact by a policy change. Using three mining projects in the asia-pacific, in Australia, Indonesia and Papua new guinea, findings about options for the investor suggest it is sometimes better to wait for a more suitable time to invest. Using such knowledge provides the potential to change the investment climate in mining.
... Assessing the timing of mining investment under tax policy 119 required to pay in most countries, generally at the same rate paid by other corporation (Wilson 2016). In a federal political system, the special mining taxes can be complicated due to the existence of multiple government objectives such as maximising government revenue, maximising mineral rents, tax revenue stability, and attracting mining investment under the control of mineral resources with provincial or state governments. ...
... In a federal political system, the special mining taxes can be complicated due to the existence of multiple government objectives such as maximising government revenue, maximising mineral rents, tax revenue stability, and attracting mining investment under the control of mineral resources with provincial or state governments. 5 Mineral royalties may either be levied by two levels of government (such as Canada) or divided between governments based on a revenue sharing formula (in Brazil) (Wilson 2016). ...
... Fiscal policies can either increase tax subsidies or reduce tax rates and any variation of these policies can significantly change the mining investment decision. The imposition of tax credits or changes in tax rates is completely dependent on the regulatory decisions of the current economic climate (Wilson 2016). The researchers believe that the variation of tax systems such as The Mineral Resource Rent Tax (MRRT) or is best known as the proposed Resource Super Profit Tax (RSPT) in Australia in general has a significant impact on the mining investment decisions, rather than the imposition of tax credits (The Australian Government 2015). ...
Mining involves the discovery, extraction, and
processing of non-renewable resources. The potential of
mining revenues to contribute to national economic development
is well known, but the allocation of mineral
wealth and the concern of increasing resource scarcity
have become issues of debate in the mining industry.
The purpose of this study is to introduce the binomial
decision tree analysis, which is a new approach to mining
investment decisions. The examples used examine the impact
by a policy change. Using three mining projects in
the Asia-Pacific, in Australia, Indonesia and Papua New
Guinea, findings about options for the investor suggest it
is sometimes better to wait for a more suitable time to
invest. Using such knowledge provides the potential to
change the investment climate in mining.
... Lucas, 2021; Goods, 2022;Wilson, 2016 Big four banks Very strong oligopoly. Widespread banking malpractices before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2019) and its reform proposals were subsequently greatly watered down. ...
In recent times Australia has developed into one of the world’s leading liberal democracies. Its governments have delivered continuous economic growth for more than three decades, even against the turmoil of a global pandemic. And the country’s highly competitive elections and strong political institutions operate within a stable and balanced federal system. In Australia’s Evolving Democracy a team of leading academic authors use an audit approach to critically explore national government institutions, as well as state- and territory-level politics, and to examine how each has contributed to or held back Australian political life as it has changed and diversified. For instance, the top two parties’ monopoly of governance has only begun to adjust to a modern transition to multi-party politics, although balanced voting systems for two-house legislatures have allowed for some adaptation. To date, the country has successfully avoided both rancorous populist politics (as in the USA) and serious governance decline (as in the UK). Each of the book’s 28 chapters tackles one institution or issue, outlining recent developments along with an analysis of strengths, weaknesses, opportunities and threats, to fully evaluate the state of Australian democracy in the 21st century. In doing so, the authors draw key lessons for other democracies, showing in detail how robust major and micro-institutions can guard against democratic ‘backsliding’ and policy failures. This comprehensive audit also highlights scope for potential democratic improvements. Australia continues to confront the challenges of partisan political barriers to addressing climate change and improving the situation of First Nations peoples, redressing modern social inequalities, and responding to popular mistrust of government and politicians. By taking an in-depth, nuanced approach to multiple democratic issues across the whole of the country’s distinctive political system, this book provides analysis that is accessible for students new to Australian politics, along with many insights for political scientists studying comparative democratic politics and Australian institutions.
... From an international perspective, public regulation of mineral exploration tends to differ between jurisdictions, while much private regulation has gained international distribution. One example of how public regulation may differ between jurisdictions is how the tools for collecting rent or taxes from mineral exploration and mining operations differ between countries and territories with some jurisdictions aggressively taxing the mining sector while others, including Sweden, use relaxed tax and rent regimes (Wilson 2016). In Sweden, the present day mineral regulation dates back to the early 1990s when the industry was deregulated. ...
Any forward-oriented enterprise must somehow manage the challenges posed by uncertainty and with its distant temporal horizons, high stakes, and low probability of success, mineral exploration is a good illustration of this general rule. Based on a combination of interviews, observations, and archival research, this thesis investigates how explorationists use predictions to manage the material complexities and the uncertainties that contribute to determining the future minability of mineral deposits. Using data from industrial mineral exploration in Sweden, the thesis traces the production and use of predictions across the exploration process, from its early explorative phases to its development into a techno-economic hybrid in advanced stage exploration. With the aid of a detailed study of the valuation processes involved in measuring and predicting the future minability in exploration projects, the thesis demonstrates how risk management in mineral exploration relies both on a continuous addition of measurements and data on different dimensions of “risk” and the bracketing of any uncertainties unaccounted for in exploration practice and standards. Moreover, the thesis shows how industry standards provide explorationists with repertoires of values that are called upon in order to justify predictions as accurate and precise depictions of the future. However, the thesis also demonstrates how justifications of predictions in mineral exploration are not only about prediction correctness, but also about the merits of realizing the predicted future as explorationists are shown to actualize values expressed in contemporary debates to justify the benefits of a mining future. Lastly, the thesis also shows how predictions are used in explorationists’ interactions with their publics. To accomplish this, the thesis outlines how investors, governmental agencies, and other actors upon whom explorationists depend on for resources such as capital and legal permits use second-order metapredictions to determine whether to invest in or grant permits to a project. Moreover, the thesis also highlights how these metapredictors are invited by explorationists to co-create the predicted mining future while other affected parties are left out. Together, the findings reported here demonstrates not only the way predictions are used in uncertainty management and the epistemic challenges involved in making predictions, but also the social and political implementations of how predictions are used not only to make claims about the future, but also how explorationists and their associates use predictions to claim the future for themselves.
... This study approach can assist the GoPNG to distinguish high performing tax instruments from those that are inefficient. The findings of the study will help the GoPNG to rationalise its policy by retaining and strengthening the progressive tax instruments that will ensure efficient tax planning (Wilson 2016). Additionally, the study may help reduce the tendency of governments to change tax policies during periods of high profits, which often lead to fiscal instability, erosion of investor confidence and derailment of long-term existence of the mining industry (Robson 2015). ...
This paper uses ethnographic and archival data to analyze the creation and legitimation of predictions in industrial mineral exploration in Sweden. The search for exploitable ore deposits is a finance intensive process of resource creation in which mineral explorationists (e)valuate mineral deposits in order to assess their future minability. This paper builds on the recent literature on ‘imagined futures’ and futurework and combines it with the conceptual toolkit provided by (e)valuation research in order to outline how mineral explorationists establish a deposit’s existence and its future minability. Arguing that the creation of imagined futures plays an important role in mining and other social and economic phenomena, this article shows how imagined futures are created, and by whom, in the field of industrial mineral exploration, and how the creation of these futures is situated in a universe of actors’ beliefs, of valuation devices, and of norms and standards. The paper also shows how industrial standards guide this predictive enterprise and provides legitimacy to the results.
This article examines the Australian Senate’s 2015–2017 inquiry into corporate tax avoidance to illuminate the tax strategies used by the multinational corporations (MNCs) most targeted by tax justice campaigners, versus those of particular relevance in an Australian context: mining companies. Using documentary analysis, we examine how these companies discursively defended their tax avoidance strategies. Despite differences in the context in which the issue of tax minimisation has risen to prominence, we show that in Australia, MNCs’ legitimacy in paying lower levels of tax has been challenged in a similar manner to that of MNCs in other industry sectors that were held responsible for post-global financial crisis austerity measures in states like the US and UK. This suggests that history and context matter not in and of themselves, but for the impact they have on the discursive power of the actors involved, depending on the visibility and salience of the issue associated with them.
This article examines the mobilisation of small and mid-tier companies in the mining industry's campaign against the Resources Super Profits Tax (RSPT), drawing on interviews with 18 industry players. The government anticipated that small exploration and development companies would support the RSPT, on account of its promise to contribute towards the costs of exploration and development. In doing so, it was guided by Treasury advice and the assumption of calculative rationality on the part of small companies. Instead, industry leaders forged a common front against the tax within days of its announcement. In doing so, they appealed to the hope of extraordinary returns – or what is sometimes described as ‘sentiment’, ‘animal spirits’ and ‘irrational exuberance’ – among mining entrepreneurs and investors, against the odds. Other researchers have argued that the debate around the RSPT highlights the ‘power of ideas’, but we argue that it highlights the ‘power of hope’.
The political ramifications of the failed Resources Super Profit Tax have been widely documented, yet the causes of this political failure are more contested. Many accounts highlight the discursive power of business and the effectiveness of their campaign against the mining tax. Effective business activism certainly played its part, but this article argues that strategic failings on the part of government also influenced the outcome. This article highlights how the Labor government's failure to consult, to understand the political implications of federalism and above all its impact on the industry in the hope that future policymakers will learn from the mistakes of the mining tax debacle.
Intergovernmental conflict over the allocation of resource revenue in federal systems is not uncommon. However, there is remarkably
little scholarship on how such political tensions are managed in different federations and whether, over time, resource politics
can reshape federal dynamics. This article assesses these questions through a strategic comparison of resource federalism
in Canada and Australia since the 1970s. We argue that the political and institutional strategies employed within the Canadian
federation, with its greater commitment to fiscal and political decentralization, has been more adept at managing short term
political tensions associated with resource booms relative to the Australian model, with its creeping centrism and entrenched
system of horizontal equalization. The study also finds that, over time, resource conflict has the potential to shape the
practice of federalism in resource-rich jurisdictions by providing political incentives to decentralize nonrenewable resource
revenue collection.
The efficiency and equity arguments for changing the structure of, and the aggregate level of, special taxation of the mining industry are reviewed. An economic rent base tax would cause smaller taxation distortions than the current quantity base royalties. A higher level of taxation of immobile factors, including mining resources, as part of a tax-mix change to fund lower taxation of internationally mobile capital would lead to higher Australian economic growth and after-tax returns to labour. The Brown tax, the Allowance for Corporate Capital, and versions of a resource rent tax, including the petroleum resource rent tax and minerals resource rent tax variants, are described and evaluated as measures of economic rent in the mining industry. In principle, the Brown tax has greater transparency and desired efficiency properties.
We argue five main propositions. First, the choice between royalties and profit-based taxation involves an efficiency tradeoff, between diminished incentives to produce output on one hand, and diminished incentives to minimise costs on the other (as in Laffont and Tirole, 1993). So the Brown tax is indeed a tax, and one that reduces the incentive to mine. Next, the ex post Resource Super Profits Tax (RSPT) falls on quasi-rents as well as on rents, and therefore involves some expropriation. Third, there may be a case in favour of a retrospective RSPT or the like, but it has yet to be made persuasively. Fourth, the successor to the RSPT – the Minerals Resource Rent Tax (MRRT) – has many of the inefficiencies of the RSPT but adds some further serious inefficiencies of its own. Last, the value of revenues from taxes such as the RSPT and the MRRT is usually over-stated, as those revenues are highly risky. The failure to take account of the risky character of those income streams amounts to fiscal illusion and makes it more likely that unwise spending commitments will be made.
Barriers to trade come in a variety of forms. This paper examines one such barrier, export restrictions, and how it impacts trade and global supply in selected strategic metals and minerals. The metals and minerals examined in the paper are of particular interest for a number of reasons: they are generally geographically concentrated in a few countries, many are used in the production of high-technology goods in strategic sectors and there are few substitutes for these raw materials given the present state of technology. For all these reasons, importing countries are dependent on a reliable supply of these raw materials. Export restrictions may be applied for a number of reasons: protection of the environment, preservation of natural resources, protection of downstream industries, or as a response to a number of different market imperfections. This paper examines the motivations for using export restrictions and finds varying impacts on trade and global supply. In one case, the export restrictions put into place did not fulfill their objective of environmental protection. In another, the presence of export restrictions in one country put pressure on other exporters to apply restrictions suggesting the potential for competitive policy practices in restricting exports. In a third case study, export restrictions were seen to impact investment decisions by potential suppliers worldwide by introducing an added element of risk in the industry. The impact of export restrictions on strategic metals and minerals are exacerbated in many cases because producing countries have a quasi-monopoly on supply. Since these metals and minerals are essential in the production of some high-technology products and are not easily replaceable in the medium term, industry participants in some importing countries are concerned about future access at sustainable prices.
Over the past two decades there has been a worldwide fall in statutory corporate tax (CT) rates. Focusing on Australia, this article establishes three empirical facts which challenge much of the existing literature. First, CT competition was the crucial driving force behind CT cuts. Second, policy makers had to abandon tax-related investment incentives in order to pay for lower CT rates. This broadening of the CT base is costly, because it potentially disadvantages domestic firms and may, over the longer term, erode the CT base. Third, CT cuts have put pressure on the personal income tax base, as low corporate rates provide tax avoidance opportunities for high-income earners.
The political ramifications of the failed Resources Super Profit Tax have been widely documented, yet the causes of this political failure are more contested. Many accounts highlight the discursive power of business and the effectiveness of their campaign against the mining tax. Effective business activism certainly played its part, but this article argues that strategic failings on the part of government also influenced the outcome. This article highlights how the Labor government's failure to consult, to understand the political implications of federalism and above all its impact on the industry in the hope that future policymakers will learn from the mistakes of the mining tax debacle.
In 2010 the Australian federal government fought and lost an intense and very public battle with the country's mining industry over the introduction of a new ‘super-profits’ tax. The proposed tax was withdrawn and the Prime Minister, Kevin Rudd, was removed from office. Why did the government lose this battle and what can this episode tell us about the nature and determinants of business power? We argue that business power is not an objective condition but is shaped subjectively and inter-subjectively. What counts in the power equation is not whether business investment is essential for growth or whether business will disinvest if a new tax is imposed, but whether actors believe this to be the case. One reason why the structural power of business varies is because actors’ normative and causal ideas about the value and determinants of business investment vary. In the Australian case ministers did not believe that the introduction of a new tax would jeopardise investment. Ministers did however come to believe that the mining industry had successfully persuaded a large number of voters that the introduction of a new tax would jeopardise investment, employment and growth. This is why the tax was eventually abandoned.
In July 2010, the Australian Government announced that, effective from 1 July 2012, the petroleum resource rent tax will apply to all offshore and onshore oil and gas projects (including liquefied natural gas and coal seam gas projects), and a minerals resource rent tax will apply to coal and iron ore projects. State/territory governments mainly apply ad valorem royalties to oil and gas, coal and iron ore projects; these royalty payments will be creditable under the Australian Government’s resource rent taxes. This paper argues that a hybrid system allows governments to collect a minimum return to the non‐renewable resource through the ad valorem royalty and a share of the rent from higher‐profit projects through the rent‐based tax. This paper also provides updated and expanded estimates of the potential shortfall in resource taxation revenue over the period 1992–1993 to 2009–2010 by comparing actual revenue with revenue under a range of hypothetical Brown taxes.
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