Taxing Resource Rents in Australia - What a Capital Idea

Abstract

In this paper I use Marx’s analysis of rent to try to understand the complexities associated with the attempts to tax resource rents in Australia. My aim is to dissect ground rent (what the landlord expropriates in capitalist society by virtue of being the owner of land) into its constituent parts – absolute rent for the use of the land and what Marx calls Differential Rent I and Differential Rent II, rents which arise from different qualities in land and different levels of capital investment in land. I will also discuss monopoly rent. Economic rent in the mining industry in Australia arises in some circumstances because of the barrier to capital that is land and land ownership and the monopoly of ownership that the States and Territories have of minerals and resources. In other circumstances rent arises because of demand which pushes the price (or did before the mining boom in Australia ended in mid-2012) above its price of production and hence gives a greater than average rate of return compared to other industries. Barriers to entry (Marx’s alien forces) prevent new investment that would equalise that above average profit back towards the average. The various rent taxes of the Commonwealth and States and Territories then are attempts by the State to claw back some of the rent (surplus or above normal surplus value) flowing to mining capital. They do this either through levies independent of the production of surplus value, in the case of State and Territory royalties, or as income taxes imposed by the Commonwealth on profits arising after surplus value has been created in the process of production. The Commonwealth could take on the role of minerals landlord and demand rent from mining companies by imposing royalties on them across Australia.

Keywords: resource rents; econmic rent; ground rent; absolute rent; differential rent; Marx; rent taxes; royalties

JEL Classification: P16; E62; H20; B14; B20