MRRT Gets Final Green Light from Senate

By
A A A

Australia's Senate approved Australian Prime Minister Julia Gillard's proposed minerals resource rent tax (MRRT) that will soon collect a 30 percent tax from profits generated by the country's mining giants.

The tax, which was approved Monday, starts rolling out July 1 this year with specific coverage on coal and iron ore mining projects.

"Only super-profitable mining companies will pay the MRRT and the proceeds will go to where they can make the greatest contribution to jobs and economic growth," Gillard said in a statement.

She said that as much as $3.7 billion (Australian) of revenues will enter the federal coffers in the first year alone of the tax and more will come as the federal government squeezes more juice from a sector that has been shoring up Australia's economy even when financial difficulties have been bearing down on other key economies worldwide.

The government has pledged that more people will benefit from the revenues spawned by the country's non-renewable resources as Federal Treasurer Wayne Swan issued assurances that Australia would "maximize the opportunities that flow from that boom and spread them to every corner of our economy."

Next on his agenda is the passage of measures that would provide tax relief to all businesses, Swan said.

"This important reform will provide a revenue stream to ensure that businesses in particular that are not in the fast lane of the resources boom get some tax relief," the treasurer was quoted by The Associated Press as saying on Monday.

Delivering the tax breaks could prove difficult for Gillard as the 38 senators who voted for the MRRT may not support government initiatives that would allow small and big companies to enjoy tax rate cuts from 29 percent to 30 percent.

The Australian Green Party, which voted with Labor in the mining tax, had already indicated that it would only support tax reductions for small businesses, insisting that savings to be realized from big corporation tax breaks should instead be used on government's health and education programs.

Opposition leader Tony Abbott has asserted that he would ditch the tax once a Liberal government gets elected next year.

Abbott's coalition has maintained that the MRRT will lead to thousands of job losses and will eventually drive away investments, with experts noting that Australia's ongoing mining boom has so far induced difficulties on other sectors of the country's economy.

Gillard, however, remained unfazed and stressed on Monday that "we continue to be determined to provide Australian businesses, large and small, with a tax cut."

Also, a brewing confrontation with state and territory governments over the mining tax could soon emerge as a number of local governments consider hiking royalties on resources extracted from their areas.

The governments of New South Wales, Queensland, Western Australia and South Australia have all criticized the implementation of MRRT, which would also mean that they would be discouraged from increasing existing royalty taxes.

At present, royalties collected are based on volumes and not on prevailing prices.

And if they insisted, Swan warned that states and territories could face the possibility of a reduced share in the goods and services tax ( GST ), which is a policy, he clarified, that will be determined by the review being conducted on GST's terms of reference.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

Referenced Stocks: GST

International Business Times

International Business Times
  • See all for International Business Times
  • View Print Version

More from International Business Times:

Related Videos

Stocks

Referenced

50%

Most Active by Volume

83,946,369
  • $16.40 ▼ 1.20%
65,919,147
  • $102.99 ▲ 0.51%
63,004,409
  • $42 ▲ 4.53%
42,618,740
  • $7.93 ▼ 2.94%
41,388,613
  • $78.37 ▼ 0.41%
40,438,996
  • $3.81 ▲ 14.76%
39,835,674
  • $12.32 ▲ 2.41%
38,147,728
  • $12.83 ▼ 2.80%
As of 10/22/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com