Mining Tax Kills Hopes for Budget Surplus
November 5, 2012 Taxation in Australia
CANBERRA – Weakening international demand for coal and iron is eroding Australia’s tax revenues, dashing the government’s hopes of a budget surplus for the current financial year.
On November 5th the Australian consulting firm Deloitte Access Economics released a new analytic report on tax collections in the country for the 2012 fiscal year, showing that the government may not reach a budget surplus, as it has overestimated the tax revenue it will gather this year.
According to the report released by the Deloitte Access Economics, the government had previously forecast a budget surplus for the 2012 fiscal year of AUD 1.1 billion, but, in light of the current economic situation in Australia and around the world, the national budget will be in deficit of AUD 4.2 billion at the end of the current period.
The report showed that the government had originally anticipated that the country’s recently implemented Mineral Resource Rent Tax (MRRT) would lead to extra tax revenues of AUD 2 billion in the first year, but the current fiscal reality is seriously undermines government’s budgetary plan, as now no more than AUD 520 million is expected to be collected from the MRT.
In a television interview on the day of the release, Chris Richardson, partner at Deloitte Access Economics, elaborated on the findings, saying that a drop in the demand and price for mineral ores around the world is the primary cause behind the disappointing collections of the MRRT.
Chris Richardson specifically mentioned that the waning demand for mineral resources from Australia is one of the biggest contributors to the decrease, saying “…the slowdown in China and its impact on coal and iron ore prices is more important for the average Australian than I think they realise.”
Responding to the forecast in the Deloitte Access Economics report, the Treasurer of Australia Wayne Swan flatly denied the validity of the arguments, saying that he does not believe it is correct and “…of course, Deloitte Access Economics doesn’t always get it right.”
Photo by Matthew Kenwrick