The Minerals Resource Rent Tax (MRRT), the less contentious younger sibling of the Carbon Tax, is a vital piece of legislation in shoring up Australia’s future after the mining boom subsides. It attempts to address the two-speed economy and recognises the fact that the mining boom will not last forever.
The MRRT is a watered-down version of the Rudd Government’s proposed Resources Super Profits Tax (RSPT). The RSPT proposal itself was one of the key recommendations of the Henry Taxation Review in 2009.
Following the mining industry’s intense scare campaign against the RSPT, Rudd was replaced with Gillard who sought a compromise to end the ALP’s war with the big miners. Announced in July 2010, the MRRT is a very watered down version of the RSPT.
The justification for the MRRT is the idea of ‘economic rent’. Economic Rent is a concept derived by classical economists, including the one and only Karl Marx, and involves the payment for a resource where the availability of the resource is insensitive to the size of the payment received for its use. Thus rents are an excellent source of taxation as the tax does not have any capacity to distort economic activity.
Rudd’s attempt to implement the RSPT demonstrated just how easily politicians can collapse in the face of immense industry lobbying.
The mining industry’s large-scale anti-RSPT campaign brought Rudd to his lowest approval rating and would precipitate in his removal as Labor leader.
Interestingly, support for a resources rent tax has always hovered around 60-70%. The failure of the RSPT showed just how vocal any minority can be.
The MRRT is an important step in preparing Australia for a post-mining boom economy. Unless we secure the economic benefits to invest in infrastructure for the future, Australia will recognise an empty town that was bustling with the discovery of oil and bust when it was all gone.
Thanks so much for this. The role of the RSPT in Kevin Rudd’s downfall seems to have been conveniently forgotten. Whenever people claimed that Australia didn’t need an Occupy movement, I remind them of this incident.
(click on the above link to read entire article, I highly recommend it).