State-federal resource rent tax rivalry : the Queensland railways and the federal export tax / J.H. Cassing and A.L. Hillman.

Abstract

This paper presents a stylised account and analysis of the implications of the intergovernmental tax rivalry which arises between the Queensland and Federal governments in their efforts to tax resource rents. In particular, coal is taxed explicitly through the Federal export levy and implicitly through the Queensland railways "excess rail freight". A game-theoretic environment thus arises. It is shown that if each government sets its tax rate optimally in reaction to the other government's tax policy, then less revenue is generated at a higher deadweight cost. The optimal co-operative solution is compared to the non-co-operative equilibrium and the resulting welfare gains are identified.