State Taxation of the Iron Ore Industry in Western Australia

K. G. Williams and Robert Fraser

Australian Economic Review, 1985, vol. 18, issue 1, 30-36

Abstract: As a contribution to the debate over the taxation of the extractive industries, this article provides estimates of the short run and long run price elasticities of supply for iron ore in Western Australia. Using these estimates, an increase of 1 per cent in the average royalty rate on iron ore is shown to result in a short run decline of 0.61 per cent in the output of iron ore, and a long run decline of 4.36 per cent. It is concluded that raising tax revenue by ad valorem royalties on iron ore leads to a substantial distortion of output, especially after accounting for indirect effects.

Date: 1985
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