Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

I move:

That the Senate take note of answers given by ministers to questions without notice asked by Opposition senators today.

The mining tax has been a dog's breakfast for some time. The mining tax is an ongoing fiscal fiasco which we have argued for some time is a train wreck in the making. But not even the coalition thought that the mining tax would be such a fiscal mess as it has turned out to be. Last week we all found out that this complex new tax targeting an important sector in our economy, which is costly to administer, costly to comply with and which increased our sovereign risk profile, has not raised any revenue—at least not from those three biggest miners who were given exclusive access to the government to help design it.

One of the key implications of the fact that those three biggest miners are not paying any mining tax so far is that they will continue to accumulate royalty credits. You would be aware that back in July 2010 the Prime Minister and the Treasurer signed this mining tax deal with the managing directors of the three biggest mining companies. They had thrown out all of the officials. The officials in the Department of the Prime Minister and Cabinet were quite insistent in Senate estimates to say that on this occasion, before signing on the dotted line, the Prime Minister did not get advice from the Prime Minister's department. The Prime Minister on that occasion got her advice directly from the Treasurer. It was our Treasurer, Mr Swan, who advised the Prime Minister to sign this mining tax deal.

The government initially thought that this mining tax would raise $22½ billion over the initial four years of operation. That went all the way down to $13.4 billion in the most recent budget. In MYEFO we were told it would be $9.1 billion. It turns out that in the first quarter it has not raised anything, at least from those three big miners. No wonder the government was so desperate to rush out the Mid-Year Economic and Fiscal Outlook on the day it was released, because that was the same day that the first mining tax revenue collection was due.

Here we are and the government is not raising any mining tax revenue. In the meantime, courtesy of the deal that Prime Minister and the Treasurer signed with those three big mining companies, they are accumulating credits for the state royalties they have paid to the state governments. But there is more. Not only are those mining companies accumulating credits but also the government will have to pay compound interest on those credits. It is not a bad rate of return either. It is a risk-free rate of return, and anybody who can get a risk-free rate of return of more than 10 per cent would be pretty happy. That is exactly what the government signed up to in the mining tax heads of agreement that the Minister for Finance and Deregulation is clearly not across although it is a mere 1½ pages long. I suggest the finance minister has a close look at it. This is what it says:

All state and territory royalties will be creditable against the resources tax liability.

Then:

Any royalties paid and not claimed—

of course, you cannot claim any royalties if you have not paid any mining tax—

as a credit will be carried forward at the uplift rate of the long-term bond rate—

which right now is 3.12 per cent—

plus seven per cent.

That is a 10.12 per cent interest rate that is applied to the outstanding royalty credits.

I refer the minister to be government's Minerals Resource Rent Tax Act and specifically section 60-25 part (2) where it describes how royalty credits are treated. When you look at the operation of the MRRT royalty credits from year to year you will see that the interest in any year will include the accumulated credit of the previous year plus interest. It is interest on interest, and that is what you call compound interest.

We have said for some time that this mining tax is not going to raise any money for a long time. It is a complex tax which is distorting, making it harder for smaller miners in particular to be the success stories of tomorrow. At the same time this incompetent Treasurer has attached billions of dollars of expenditure to this mining tax based on the revenue he thought it would raise. This is just extraordinary. No wonder this government has delivered $173 billion of accumulated deficits. (Time expired)