Assignment 1 (Mineral Resource Rent Tax (MRRT) Case Study

Assignment 1 (Mineral Resource Rent Tax (MRRT) - Case Study Example Introduction of RSPT would lead to reduction in the income tax but it was expected that such would not lead to the reduction in revenue, since the decrease in tax would encourage companies to undertake more projects which would lead to rise in the revenue. This increase in revenue would be utilized by the government of Australia for bringing about infrastructure development in the country. The Australian Government decided to provide the resource entities with a refundable credit for the royalties paid by them in the previous years, so that the mining companies receive an extra relaxation on their taxation policies and they are encouraged towards revenue generation. Introduction The Australian Government accepted the proposal of the Australia’s Future Tax System Review to introduce a tax charge on the resource rents and the super profits earned by the mining companies from the exploitation of the non-renewable resources of Australia. This new tax policy will be known as Resour ce Super Profits Tax (RSPT). The RSPT would provide the community of Australia with a share of income that will be derived from the extraction and sale of non-renewable resources of Australia in countries all over the world. ... The RSPT was replaced by the Minerals Resource Rent Tax (MRRT) in late June 2010 because of a resulting controversy in terms of RSPT. The objective of the government in the implementation of the MRRT policy was same as that of the RSPT, along with an additional objective to overcome the controversies and adverse affect faced on the implementation of the RSPT. The area of consideration of the MRRT was limited than the RSPT, which increased its relevance and brought efficiency. The MRRT policies received support from mining unions such as Forestry, Energy Union, Construction and Mining, Australian Greens, and from the Australian Council of trade Unions. The new policy led to the reduction in tax for the mining companies, thus fulfilling one of the objectives with which the policy was introduced. Answer 1. The main features of Resources Super Profit Tax are- The nominal tax rate of 40% on assessable resource profits is applicable. The tax is to be imposed on revenue earned after deducti ng the allowance for capital expenditure. The tax is to be imposed on profits above the normal rate of return, which is determined to be 6%, being the risk-free long term bond rate. To compensate for the higher risk that is involved in the mining ventures, losses on abandoned projects were to be refunded at the mirror rate of 40% of the loss suffered (Kreiser, et al., p.227). Features of Minerals resource rent tax (MRRT) are- The proposed MRRT will apply to the coal and iron ore projects in Australia from 1st July, 2012 at 30% rate. The projects will be entitled to an extraction allowance of 25% which shall reduce the taxable profits subject to the MRRT. MRRT liability will not apply to