Combining resource rent and income taxation for neutral impact
Source: Australian Tax Forum Journal Article
Published Date: 1 Oct 2019
Income tax subsequent to a resource rent tax (RRT) in the production phase of petroleum resource projects where the risk of losing RRT deductions is low should, in order to maintain the RRT's neutral impact, be applied: first, to pre'taxes cash flow cut by the RRT tax rate; and, second, to the minimal-risk assets created by substitution of RRT loss carry'forward (with long'term government bond rate (LTBR) uplift) for immediate cash rebates for losses. Absent income tax on the minimal'risk assets, RRT loss uplift would be set at a post'income tax level. Leaving the minimal'risk assets embedded in aggregate post'RRT flows for income tax purposes, as under traditional RRT design, justifies uplift at pre'tax LTBR but, compared to ideal assimilation of RRT and income tax, imposes investment distortions and, potentially, greater income tax impost on investors.
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Details
- Published By: Wayne Mayo
- Published On:1 Oct 2019
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