Australia axed a mining tax proposal intended to return a share of mining spoils to government.

Parliament of Australia on Tuesday agreed to scrap the Mineral Resource Rent Tax introduced by the previous Labour Administration in 2012.

Resource rent tax

Government struck a surprise deal with stakeholders and opposition senators to scrap the minerals tax, which imposed a levy on annual profits above $70 million on iron ore and coal at a rate of 30%.

It was intended to return a share of the spoils of Australia’s decade-long mining boom to government coffers, but was widely criticised after its revenues fell dramatically short of forecasts.

Tax repeal

The mining tax was repealed by the Australian Senate with triumphant Treasurer Joe Hockey telling parliament ‘we said we’d get rid of the mining tax; we’ve delivered in full’.

Australia’s ANZ bank economists in July this year released a report on Australia’s controversial minerals resources rent tax provided little revenue to the country.

The ANZ report stated that successive governments in Australia have failed to effectively tax the mining boom. ANZ economists noted that the resource rent taxes were not a significant source of revenue during phase one and two of the mining boom, despite expectations to the contrary.

Scrapping resource tax

According to media reports, scrapping the tax was made possible after the government did a deal with minor parties in the Senate. A compromise was reached.

Dumping the tax was a major win for Australia’s Prime Minister Tony Abbott and follows his victory in July when he succeeded in abolishing a divisive carbon levy after years of vexed political debate.