The main purpose of this report is to analyze the affection of Mineral Resource Rent Tax Australia imposed from July 1, 2012 on the demand and supply of iron ore industry and the relevant companies though relevant theories and diagrams. This report will mainly focus on the analysis the market structure and the affection of MRRT. In addition, it also includes an interesting sector about the factor specific to the sector. Finally, the report will illustrate the conclusions and recommendations.
Australia has become one of the leading countries as a result of natural advantage, the good policy environment and the performance of the industry. As is known to all, the price of iron ore grew substantially in the last years. Many large mining companies gained huge profits because of comparatively lower cost and higher price. The purpose of introduction of -Mineral Recourse Rent Tax (MRRT) is to provide an opportunity for Australia people to share the huge profit(mining-tax.com.au, 2013). The tax revenue will be used to education reform, the national disability insurance scheme.
A new taxation regime against coal and iron ore mining industry-Mineral Recourse Rent Tax entered into force on July 1, 2012. The purpose of the mining tax is not only to generate the fiscal revenue but also to propel the establishment of a balanced economy.
The Mineral Recourse Rent TAX is a kind of tax imposed on the surplus profit from the exploration of the non-renewable recourses in Australia ( gaden.com.au,2012). According to the tax, it is normally leveraged on 30% from the surplus profit that is gained from the mining of iron ore and coal. Due to the recognition of the know - how and special skills that companies contributed to the extraction of mineral, a 25% of extraction allowance is reduced on the basis of the imposition at the rate of 30% . In consequence, the effective tax rate though calculation is 22.5% (Freebaurn,2013). Based on the tax, all the extraction companies whose annual profit above $75 billion are obliged to pay the tax so the tax will not be a burden to small companies. The imposition of MRRT only applies to iron ore, oil gas and coal.
The Mineral Resource Rent Tax is a tax that Australia imposed from the surplus profit of big companies whose profit reaches above $75 billion for the purpose of creating a balanced economy. According to the analysis above, but due to the slowdown of China and the decline of the price, the imposition of MRRT reduced the output. On the other hand, the tax regime is far from perfection and has many deficiencies in itself. As is a result, the revenue did not achieve the result it was expected.