An empirical analysis of the tax burden of mining firms versus non-mining firms in Australia

This study investigates both the explicit and implicit tax burdens of mining firms versus nonmining firms in Australia for the period from 2006 to 2009. Explicit tax burdens are measured by current effective tax rate. Implicit tax burdens are present if firms receiving tax subsidies suffer reductions in pretax rate of return. The results show that mining firms have a lower explicit tax burden than nonmining firms after controlling for firm size, capital intensity and foreign operations. Mining firms do not incur offsetting implicit tax on the miningspecific income tax subsidies, but nonmining firms suffer implicit tax on the tax subsidies received. Moreover, mining firms are found to have a significantly higher pretax rate of return on equity than nonmining firms because low resource taxes on resources extracted from Australia mean low cost of sales for mining firms.