A draft of the proposed Minerals Resource Rent Tax (MRRT) has been released by the Treasury department of the Australian government. The new tax is a compromise which resulted after Kevin Rudd’s tax was rejected outright by the mining industry. The original resources supertax is what caused the ouster of the former Prime Minister after vehement opposition was seen to the tax proposal.
The architects of the new version of the tax include the present Prime Minister Julia Gillard and the three main mining companies operating in Australia namely BHP Billiton, Xstrata and Rio Tinto. The watered down version of the original tax has been found acceptable to the mining industry with the Minerals Council of Australia supporting it as well.
The tax is being closely monitored by a number of nations who are looking forward to imitating it if it is successful in raising funds for the Australian federal government. The tax if passed will come into effect starting July 1, 2012. It is potentially likely to raise the global price for coal and iron ore exports from the country.
Under the new law the 30% tax rate will be imposed on profits after a coal or iron ore mining project’s return on investment is 7% points higher than the government long term bond rate. The rate is usually 5%. Miners will be entitled to a 25% extraction allowance and will also be able to offset previous losses against the tax. The government hopes to raise Australian $7.7 billion in the first two years after the tax is implemented.