Between a rock and a hard place?

Some practical issues with the resources super profits tax for the mining industry


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Between a rock and a hard placeThe introduction of a new resource super profits tax (RSPT) is the most controversial element of the Government’s response to the Henry Review, released on Sunday 2 May 2010. The details we have so far, apart from the Henry Report itself, are contained in the Government’s paper The Resource Super Profits Tax: a fair return to the nation, accompanying fact sheet and are also from initial consultations with the Resources Tax Consultation Panel. There is significant uncertainty in the design of the RSPT and additional compliance complexity seems inevitable.

The controversy over the measure has focused on:

  • The adequacy of transitional measures based on the book value of mine improvements
  • The RSPT allowance rate based on the ten-year government bond rate compared with mining companies cost of capital
  • Why the 40% RSPT rate, coupled with other design features such as the 6% RSPT allowance rate only tax ’super profits’.

While resolving these issues satisfactorily is critical to the implementation of the tax, in this paper we will not address those issues, but will examine some of the details and the issues involved with implementation.