Australia could collect extra $45b a year through better resource taxes

Does the mineral wealth in our soil and beneath our ocean belong to Australians or to mining companies and their shareholders?Prosper Australia, a tax reform think tank, says this country has a resource tax and royalty problem.It estimates Australia is losing $45 billion a year in potential revenue because it is failing to collect more from the extractive mining and gas industries when commodity prices boom and profits surge. It says we need to fix our tax system's "boom sensitivity" so public revenue rises automatically when public resources generate windfall gains."Once coal, iron ore, or gas is extracted and sold, it is gone," the organisation says."Companies invest capital, technology, and expertise to extract these resources, and they should earn a commercial return."But they do not create the underlying resource, so when resource prices and profits surge, the public should share properly in the upside."There is a clear public demand for Australia to rapidly modernise its public-capture mechanisms before more finite public wealth is extracted without a fair public return."Australia's resource wealth giveawayThe organisation released a report last week, Australia's resource wealth giveaway: How weak public capture leaves billions in revenue on the table.The report's author was Richard Wielga, a former economist with Victoria's Department of Treasury and Finance.It compares Australia's resource tax and royalty system against selected resource-rich peers, including Norway, Alaska, Chile, Peru, Québec, and Queensland's coal sector specifically (given Queensland's recent tax changes).It asks three questions about Australia's resource tax regime:Is the system designed to collect more when prices and profits surge?What level of revenue does the public actually collect?Does stronger public capture automatically drive investment away?It says if Australia's system had better boom sensitivity, it would collect around $45 billion more every year across state and Commonwealth revenue streams, as it rode the global commodity price cycle.It estimates Australia would collect an extra $28 billion a year from "mining" activity (coal, iron ore, gold, copper, lithium and other miners), and $16 billion to $18 billion from the "petroleum" sector (oil, gas and LNG).See the graphic below:International comparisonsThe report asks: for every dollar of value created by the resource sector, how much was collected by the public?It then compares Australia's "public-capture ratio" with some of its global peers.It shows that Australia's public-capture ratio for petroleum is very weak compared to Norway and Alaska.It makes the point that Norway's mixed state-participation model is very different to Australia's private-operator model, so to make Norway's public-capture ratio more comparable with Australia's, it removes state-participation activity from Norway's numbers (it makes other adjustments for Alaska).It shows Australia's mining result is stronger relative to peers, but it could be much stronger, as Queensland coal shows."Australia's mining-only public-capture result is stronger than might have been expected," the report says."It is higher than the observed ratios for all three selected international mining peers: Quebec, Chile, and Peru."That is surprising because Australia's mining design relies heavily on low and flat royalties, while those peers have more boom-sensitive mining regimes."[But] this result does not mean Australia's mining royalty design is optimal or that the status quo should remain."The report says several factors may help to explain the result."Actual collection depends on commodity mix, price cycles, project maturity, and cost structures," it says."Australia's mining sector includes large, mature, high-volume iron ore and coal production. Quebec, Chile, and Peru have different commodity mixes and cost structures."Differences in tax administration and compliance may also affect observed collections."How different designs respond to a boom differentlyThe report says not all royalties or taxes respond to resource booms in the same way, and some tax designs can appear good on paper but perform badly.For example, it says Australia's Petroleum Resource Rent Tax (PRRT) was designed to tax super-profits from offshore petroleum projects, so its boom sensitivity design is high.But it has failed to produce strong and timely revenues, and current forecasts show no sustained improvement."Australia's experience of the PRRT does not mean super-profit taxes cannot work," the report says."But it does show that design rules matter and if these are too generous or complex, a resource rent tax can look strong on paper while collecting much less in practice."Queensland coal is the proof pointThe report says recent tax changes in Queensland show that much stronger boom-sensitive public-capture is possible in Australia.Since July 1, 2022, Queensland's coal royalty scheme has had highly progressive price bands.Its coal royalty rate rises in several steps with price: from 7 per cent at lower coal prices, to 40 per cent once coal prices exceed $300 a tonne:7% on the first $100/t12.5% on the portion from $100-$150/t15% on the portion from $150-$175/t20% on the portion from $175-$225/t30% on the portion from $225-$300/t40% on the portion above $300/tProsper Australia says that kind of royalty schedule is much more "boom-sensitive" than a flat royalty.Prior to July 1, 2022, the highest Queensland coal rate was 15 per cent on the portion above $150/t.What happened when the new tax schedule was introduced? In three years since July 2022, the number of active coal mines in Queensland increased from 53 in 2021–22 to 60 in 2024–25.The state's coal employment remained around 26,000 workers on a four-quarter average basis, and its saleable coal was "particularly stable", the report says.Prosper Australia says that evidence is important.It says arguments have recently been mounting against Queensland's royalty regime — particularly since some mine operators in Queensland began cutting jobs in 2025 and reducing production, blaming higher royalties, alongside falling coal prices and rising costs.But it says even under a well-designed, boom-sensitive royalty regime, some mines will become uneconomic when global prices fall, costs rise, or deposits mature.The latest Queensland government figures show there were 58 active coal mines in Queensland in 2025–26.Low royalties are a policy choiceOverall, the report makes two suggestions.It says Australia should modernise its royalties system and address its petroleum under-capture, while allowing viable resource projects to earn a commercial return.It says governments should adopt market-linked royalties that rise when commodity prices exceed long-run norms.Or as an alternative to a purely market-linked royalty, it says states could combine a minimum royalty floor with a second boom-sensitive component linked to prices, profits or profit margins."This helps ensure a minimum public return while production continues, and allows the public share to rise when market conditions are strong," it says.And the same principle should apply when trying to fix Australia's petroleum "under-capture," it says. "This report does not design a new Commonwealth petroleum tax, but future reforms should be judged against the same principle: public returns should rise when prices and profits surge," it says.