This essay discussed the new tax regulation introduced by the Australia government, the expected effects of this regulation and the reasons why the target is not accomplished. The conclusion is drawn that under the current real situation the Australian government is unable to generate large tax income out of the new regulation. The industry of iron ore production is an oligopoly market structure. In this industrial structure, the resource of production is controlled by a few firms and is a high barrier of entry to potential competitors. Therefore, the controlling firms are able to maximize their own profit. However, it leads to negative externalities to the entire society to pay for the social cost of iron ore production. To reduce the externality and raise the tax income for Australian government is the main target of the new regulation introduced this time. A direct tax increases additional compliance cost on the business, decreasing the quantity and increasing the price of mining products in the industry. Though Australian government aimed to achieve $2 billion tax income, they only collected $126 million in reality. There are three influencing factors which made it impossible to achieve the aimed tax income in reality. The most vital constraint is the decreasing price of mining products, followed by the increasing operation cost and the pessimistic attitude in the whole industry.
There are two major limitations in this essay. Firstly, the essay focuses on the failure of the government to generate the $2 billion tax income. However, there are other effects from this regulation, such as preventing the firm from overusing the mining resources. Only combining the social and environmental welfare in the whole picture can we truly estimate the effectiveness of this tax regulation. Secondly, a lot more statistical data is required to evaluate the outcome of the policy. Because this new policy has been introduced for more than half a year, there are very few surveys and data collected in the academic field. Therefore, the conclusion can hardly be drawn to assert whether this policy is right or not. Thus we suggest further researchers to make empirical study after a few years and statistically evaluate the influences from all respects.