The Impossibility of a Neutral Resource Rent Tax

Abstract

The proposition that the Resource Rent Tax can have a neutral effect on the level of mining investment has re-surfaced in recent literature. This paper shows that the proposition is essentially no. The models used to generate it involve a singel dimension of investment decision making. The introduction of realistic additional dimensions, such as determining how much information to seek about the mineral deposit before mining and deciding upon the appropriate timing and rate of mining investment and extraction, makes a neutral RRT impossible to achieve.

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