Sid Sidebottom (Braddon, Australian Labor Party) Share this | Hansard source

I do not need to substantiate it. That is from the modelling not just of Treasury but also of KPMG Econtech, the independent modellers. But that would not mean anything to those opposite. They just need to promote hearsay and the nay-saying of the big mining companies and that is enough. Of course it is; it always is when you have a scare campaign running.

Under the government’s tax proposals, the average worker—listen to this!—will be an extra $450 a year better off. Under the opposition’s tax plan, if that is how you can describe it, there will be no mining tax, no company tax cut and a 1.7 per cent tax increase for large companies. That would leave the same worker about $100 a year worse off. Tut-tut! Further, Labor’s tax plan will eventually boost GDP or economic output by 0.7 per cent whilst the Abbott plan would reduce GDP by 0.2 per cent. And there is more. I will throw some kitchen knives in for you as well. Investment is modelled to increase by 2.1 per cent under the government’s plan but fall by 0.55 per cent under Abbott’s. In addition, inflation will be affected. Consumer prices will be 1.1 per cent lower with the government’s taxation mix but 0.25 per cent higher with the coalition’s. Finally, average real after-tax wages are predicted to rise by 1.1 per cent under the government’s plan but would fall by 0.25 per cent under the Abbott-Hockey-Robb plan. Of course, we do not hear this in this debate from those opposite. They cannot defend their so-called tax proposal, particularly the 1.7 per cent tax on large businesses to pay for their uncosted paid parental leave scheme.

Early last week the Treasurer delivered a ministerial statement to the parliament discussing, amongst other things, the truth behind some of the myths peddled by some in the mining industry, how we will invest the proceeds of the RSPT and the posturing we have seen from some industry figures since the announcement of this vital economic reform. There has been much comment from mining companies in recent weeks about the supposed retrospectivity of the RSPT. These claims are clearly misleading, as the RSPT will apply to mining profits from 1 July 2012. It does not apply to past profits. It would help a more informed public debate if companies clearly distinguished between retrospective taxation, which this proposal is not, and taxation of existing projects, which is their actual complaint. Let’s make two points specifically related to this. The first is that complaints that the RSPT should not apply to existing projects are really an argument that governments should never change tax rates. That is not a sustainable proposition for any government any time but it is especially unsustainable when the tax share of the mining profits has fallen, regardless of what measure you use, so dramatically in recent years. As Macquarie Bank economist and interest-rate strategist Rory Robertson said last week:

… only the most naive investor could have imagined that the final prices the mining sector receives from world markets for publicly-owned resources could increase by multiples over a decade and yet governments effectively would keep selling those same resources to mining companies at the same old low prices.

Indeed, as Robertson points out, every city-based household knows that its local government rate payments will trend higher over time even if the home was bought many years earlier. Similarly, owners of rural property know that the government rates and rents are linked directly to the latest assessed value of the property and that if that value doubles then payments to the government will tend to rise in proportion.

The second point is that the report of the tax review recommended that existing projects be included, and for very good public policy reasons. To exclude existing projects would of course create significant distortion of investment, as prospective projects and existing projects would be on an uneven tax playing field. I quote from Mr Robertson:

Mining companies have also made the argument that the RSPT should be differentiated by commodity. They argue that different commodities have different revenue, cost and therefore profit profiles. Some require more investment to extract, some less.

Mining companies have used this to argue that the RSPT should apply at different rates for different commodities. But this analysis fails to grasp perhaps the most important design element of the RSPT. The fact is that, by design, an RSPT already differentiates by commodity. As a profits based tax the RSPT already takes account of the different revenue, cost and profit profiles of the different commodities. It also contains very generous treatment of investment. It therefore takes account of the different investment levels needed to develop different economies.

The government is using the proceeds of the RSPT to provide a much needed cut in the company tax rate from 30 per cent to 28 per cent for all Australian companies, with a head start for small business. This is a really important economic reform for Australia because it will help us stay competitive at a time when the company tax rates are falling in other countries, particularly in our region. It will also help boost growth and real wages over the long run. Independent modelling shows that together with the RSPT, the cut in the company rate will boost GDP by 0.7 per cent and lift investment by 2.1 per cent. By contrast, an alternative plan to lift the company tax rate by 1.7 per cent on taxable company incomes over $5 million a year will actually reduce GDP by 0.2 per cent and cut investment by 0.5 per cent according to the Treasury and that means according to the so called tax plan of the opposition.

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