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The mining withholding tax under Division 11C of the Income Tax Assessment Act 1936: It may be simple but is it equitable?


Division 11C of the Income Tax Assessment Act 1936 (Cth) was introduced in 1979 and imposes a withholding tax currently at the rate of 4 per cent on payments made in respect of mining on indigenous land. It was introduced by the Coalition Federal Government as a result of the enactment of land rights legislation in the Northern Territory. Although commentators in the areas of anthropology, economics and indigenous land rights have written extensively about this tax no one has analysed it from an income tax policy perspective. Many reviews of the Australian tax system including the most recent the Review of Australia’s Future Tax System (the Henry Review) state that for a tax system to be considered ‘good’ it should be simple, efficient, equitable, sustainable and be consistent with policy objectives.However there are often tensions between each of these goals particularly in the
balance between simplicity and equity.

This paper analyses the current withholding tax regime found in Division 11C from the tax policy perspectives of simplicity and equity. It suggests that the current regime is simple however it imposes many indirect inequities. Further, it argues that the mining withholding tax is potentially inconsistent with income tax principles and other income tax laws. It should be noted that this tax regime is very different to the proposed Minerals Resource Rent Tax and will not be replaced by this tax. A discussion of the proposed Minerals Resource Rent Tax is therefore outside the scope of the paper.

Author profiles

Dr Fiona Martin CTA
Fiona is a Professor of Taxation and Business Law School of Taxation & Business Law UNSW Business School University of New South Wales. - Current at 29 May 2019
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Binh Tran-Nam
Binh is a Professor, School of Taxation & Business Law, UNSW Australia and RMIT Asia Graduate Centre, RMIT University Vietnam, and International Fellow, Tax Administration Research Centre, Exeter University-Institute for Fiscal Studies. - Current at 03 November 2016
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