“At first glance it seems to hold something for both the combatants,” BDO said in a technical update.

“On average the impact on the resources sector should be less severe than the now defunct resource super profits tax.

“The federal government has estimated a surprisingly low $1.5 billion reduction in tax revenue over the first two years of the regime after a reduction in the company tax rate to only 29 per cent instead of 28 per cent and the scrapping of the exploration rebate.

“With the Greens, the Coalition and the voting public poised to weigh into the fight this still has the potential to turn into an ugly brawl.

“However, with a revamped consultation process about to begin, the details of the new proposal will hopefully take less time to formulate than the RSPT to deliver some much needed certainty to an industry starved of investment capital.”

One of the concessions won by BHP Billiton, Rio Tinto and Xstrata was that mining companies with profits of less than $50 million would be exempt from the MRRT.

BDO is interested to see how the tax exclusion will play out as medium-sized companies might qualify for it during years of major capital expenditure.

The MRRT is effectively a 22.5% tax which, when including the extraction allowance, is a big improvement on the 40% rate Treasurer Wayne Swan would not back down from with the RSPT.

But BDO said that the total tax burden was a combination of rate and base.

“How big a win this rate reduction is will depend heavily on the taxing point and how the resources are valued when calculating the MRRT assessable profit.”

This taxing point is based on the value of the resource at its first saleable form, minus the costs to get there. But this is also subject to the new round of industry consultation.

“The issue of defining the taxing point will undoubtedly create most of the problems during the consultation and implementation phases, and is the area that Treasury seemed to have the most trouble with during the RSPT consultation process,” BDO said.

“A simple, efficient and easy to implement resolution is quickly needed in this area if the uncertainties of the RSPT process are to be avoided.”

As the MRRT is modelled on the existing petroleum rent resource tax, deductions will not be allowed for financing costs.

“A significant issue under the RSPT was the treatment of hidden finance costs in equipment leases and mine operator charges,” BDO said.

“These have the potential to erode the revenue base and it will be interesting to see where this issue settles.”

The MRRT provides mining companies the chance to determine whether the book value or market value method should be used to determine net present value.

“If non-deductibility of mining tenements remains a feature of the MRRT, then the choice may not be that obvious as the market value of existing projects can be heavily weighted towards their tenements,” BDO said on this aspect of the tax.

“Unfortunately, taxpayers will have to go through another expensive valuation exercise and systems information updating process similar to that under tax consolidation.

“The added twist under the MRRT is that it only applies to some, not all, assets.

“The choice will also provide companies with a reason to change investment decisions as an immediate write-off [which] is far more favourable than a 25-year write-off. Non-time critical capital expenditure will undoubtedly be delayed until after the start of the MRRT if possible.”

While there is legal debate over whether the federal government has the right to tax the resources owned by the states, the MRRT does not aim to refund state royalties but credit them against MRRT liability for each project.

BDO said the cost of the better tax rate and depreciation provisions of the MRRT was that royalties would still be payable even when a project made a loss.

“This is not a desirable outcome for some companies with operations in the production ramp-up phase and under considerable cash flow pressures.

“The government’s failure to credit private royalties is extremely disappointing.”

BDO said the MRRT is subject to considerable consultation and its impact on the coal and iron ore industries remains uncertain.

The accounting firm is hoping the government will not close the door on major design issues of the MRRT before hearing the views of the smaller mining companies.