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State Taxation of the Iron Ore Industry in Western Australia
Author(s) -
Williams K. G.,
Fraser R. W.
Publication year - 1985
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1985.tb00477.x
Subject(s) - iron ore , economics , revenue , short run , tax revenue , natural resource economics , agricultural economics , macroeconomics , metallurgy , accounting , materials science
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.