PERTH (miningweekly.com) – Australia’s minerals resources rent tax (MRRT) has received the support of the International Monetary Fund (IMF), which believes that the introduction of the mining tax was “a step in the right direction”.
The MRRT, proposed by Prime Minister Julia Gillard, would introduce a 30% tax on the profits of coal and iron-ore companies. The MRRT replaced the Kevin Rudd-inspired resources super profits tax (SPT), which aimed to impose a 40% tax on resource profits across all commodity sectors.
In a report on its mission to Australia, the IMF stated that the planned introduction of the MRRT would enable a reduction in the company tax rate and would strengthen the automatic stabilisers in the budget.
However, the IMF noted that the MRRT was “less effective” in that regard than the originally proposed SPT.
“Consideration should be given to broadening the coverage to other mineral resources,” the IMF added.
It also stated that another objective of tax reform should be to facilitate the reallocation of resources so that Australia could fully benefit from improved terms of trade.
“We should therefore welcome more reliance on consumption based taxes. This would allow for the elimination of inefficient taxes at the state level that impede labour mobility and allow for reductions in federal personal income taxes that would encourage increases in labour supply and savings,” the IMF stated.
The IMF also endorsed the government’s economic and fiscal management, which it said would see the budget return to surplus within three years, and ahead of other advanced economies.
Federal Treasurer and deputy Prime Minister Wayne Swan said on Thursday that the IMF has reiterated its praise of the government's decisive stimulus action, which saw Australia emerge from the global recession better placed than almost any other developed economy, and supported hundreds of thousands of jobs from coast to coast.
“The statement underscores that the government's strict spending discipline is contributing to a rapid return to surplus and a fiscal consolidation which is faster than that of most other countries.”
Swan noted that the IMF detailed that “returning quickly to budget surpluses as the authorities intend will put Australia on a firmer footing to deal with future shocks” and that Australia's level of public debt “is projected to remain very low by advanced economy standards”.
With the global economy now recovering from the deepest recession in 75 years, the IMF believed that policy stimulus is “appropriately being withdrawn” and that the exit from stimulus, which began this year, would see the budget back in surplus by 2012/13, said Swan.
“The IMF confirms that this is faster than past consolidations in Australia and plans in most other advanced economies.”
The monetary fund also projected a gross domestic growth in Australia of between 3% and 3,5% in 2010 and 2011, which Swan said was broadly consistent with pre-election economic and fiscal outlook forecasts.
“The IMF's views serve as the foundation for the government's determination to build on its economic successes, and create a stronger, broader more competitive economy that benefits all Australians,” Swan added.