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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?

Published on 01 Feb 12 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

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 solicitor, academic and chartered tax adviser with The Taxation Institute. She commenced working as an academic after several years as a lawyer, both with the government (including the Attorney-General's Department) and in private practice. Her expertise and research are in the taxation law area and in particular how it relates to charities and interacts with issues relating to human rights and traditional land owners. Fiona has published many articles in highly regarded international and Australian law journals, including the Australian Tax Forum and Common Law World Review. She has presented at conferences on issues relating to taxation concessions applying to charities, the application of the GST particularly as it relates to charities and income tax and property development generally. She has also published a number of book chapters and a textbook in the revenue law area. In 2013, she was awarded her doctorate on the application of income tax principles to resource agreements with Indigenous Australians, with particular emphasis on the use of Indigenous charities as a tax-exempt structure. She has also received several research awards. Current at 01 April 2016 Click here to expand/collapse more articles by Fiona MARTIN.
 
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 Click here to expand/collapse more articles by Binh TRAN-NAM.
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