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Lease allocation systems, risk aversion and the resource rent tax

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  • Fraser, Rob W.

Abstract

This article examines the case of a risk‐averse mining firm facing a resource rent tax in order both to incorporate the role of the risk‐sharing quality of such a tax and to assess its implications given a government’s lease allocation system. The model develops the conditions required for an investment‐neutral RRT characterised by a threshold rate of return and a rate of tax and suggests that for an auction system of lease allocation, government revenue could be maximised by setting the tax rate below 100 per cent, but that for a discretionary system, it is in the government’s interest to introduce an RRT which is effectively rate‐of‐return regulation.

Suggested Citation

  • Fraser, Rob W., 1998. "Lease allocation systems, risk aversion and the resource rent tax," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(2), pages 1-16.
    • Handle: RePEc:ags:aareaj:117225
    DOI: 10.22004/ag.econ.117225
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    References listed on IDEAS

    as
    1. Ross Garnaut & Anthony Clunies Ross, 1979. "The Neutrality of the Resource Rent Tax," The Economic Record, The Economic Society of Australia, vol. 55(3), pages 193-201, September.
    2. repec:bla:ecorec:v:69:y:1993:i:204:p:56-60 is not listed on IDEAS
    3. repec:bla:ecorec:v:55:y:1979:i:150:p:193-201 is not listed on IDEAS
    4. Fraser, Rob W., 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 1-15, April.
    5. Fraser, Rob & Kingwell, Ross, 1997. "Can expected tax revenue be increased by an investment-preserving switch from ad valorem royalties to a resource rent tax?," Resources Policy, Elsevier, vol. 23(3), pages 103-108, September.
    6. repec:bla:ecorec:v:59:y:1983:i:166:p:232-44 is not listed on IDEAS
    7. Rulon D. Pope & Richard E. Just, 1991. "On Testing the Structure of Risk Preferences in Agricultural Supply Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 743-748.
    8. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, vol. 85(338), pages 272-287, June.
    9. Steven D. Hanson & George W. Ladd & Charles F. Curtiss, 1991. "Robustness of the Mean-Variance Model with Truncated Probability Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 436-445.
    10. Rob W. Fraser, 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 22-36, April.
    11. Rob Fraser, 1993. "On the Neutrality of the Resource Rent Tax," The Economic Record, The Economic Society of Australia, vol. 69(1), pages 56-60, March.
    12. CRAIG EMERSON and P. J. LLOYD, 1983. "Improving Mineral Taxation Policy in Australia," The Economic Record, The Economic Society of Australia, vol. 59(3), pages 232-244, September.
    13. Fraser, Rob, 1991. "Licensing resource tracts : A comparison of auction and discretionary systems," Resources Policy, Elsevier, vol. 17(4), pages 271-283, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ge, Jianping & Lei, Yalin, 2018. "Resource tax on rare earths in China: Policy evolution and market responses," Resources Policy, Elsevier, vol. 59(C), pages 291-297.
    2. Fraser, Rob W., 1999. "An analysis of the Western Australian gold royalty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(1), pages 1-16, March.
    3. Fraser, Rob, 2000. "Is risk-sharing resource taxation in society's best interests if prices are log-normally distributed?," Resources Policy, Elsevier, vol. 26(4), pages 219-225, December.
    4. Sunnevag, Kjell J., 2000. "Designing auctions for offshore petroleum lease allocation," Resources Policy, Elsevier, vol. 26(1), pages 3-16, March.
    5. Sunnevag, Kjell J., 2002. "Auctions combined with ex post taxation--expected revenue when three parties want a piece of the cake," Resources Policy, Elsevier, vol. 28(1-2), pages 49-59.
    6. Fraser, Rob W., 1999. "The state of resource taxation in Australia: 'An inexcusable folly for the nation'?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(3), pages 1-20, September.

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