Thursday, 3 November 2011
Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Petroleum Resource Rent Tax Assessment Amendment Bill 2011, Petroleum Resource Rent Tax (Imposition — General) Bill 2011, Petroleum Resource Rent Tax (Imposition — Customs) Bill 2011, Petroleum Resource Rent Tax (Imposition — Excise) Bill 2011, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, Superannuation Guarantee (Administration) Amendment Bill 2011; Second Reading
Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Hansard source
Thanks, Mr Deputy Speaker. First they tried to nationalise 40 per cent of the resources sector. This is unprecedented, and it spooked investors around the world. Now this tax targets the mid-tier miners. It is a highly discriminatory tax. It is still in a very dysfunctional form as a tax. It has not received any favourable treatment except from the three big miners. It is seen as a bungled proposal and it reinforces that the government's core instinct is to tax, spend and borrow.
If you are responsible in any organisation—whether you are in business, sport or government—the first thing you do is identify your strengths. Once you have identified the two or three major strengths of your business or your country, you then seek to nurture, develop and protect those strengths, because they underpin your success. You do not see a football team send their champion player out onto the ground with a lead weight around his neck. You nurture your best players. They are the ones that give you the premiership. They are the ones who do something magical in the last half of the last quarter.
Clearly the mining and resources sector is one of our nation's great strengths. But what do we see? We see a government that has sought to introduce not just a carbon tax but also a mining tax into the environment of a mining boom when our mining and resources sector, perhaps our greatest strength, has contributed so importantly to the quality of life that we have enjoyed in Australia for well over 100 years. This government is imposing in the middle of a mining boom two new taxes. It is ignorance and it is envy, but, most importantly of all, it is dangerous. It is dangerous in terms of the lost job opportunities and the lost investment opportunities—and we are seeing sovereign risk manifest itself as a consequence.
Not only did they bungle the proposal in terms of its design—it has taken 18 months—but it is now being rushed in as a symbolic attempt at achievement by a Prime Minister who is hanging by her fingernails onto the leadership. That is what this is about. The way this thing has been designed and the way it is being introduced is all about politics.
Agriculture is another of our great strengths, but look at the way they handled the live cattle job. The incompetence with which they handled that has added to sovereign risk. Our international education effort is another of our great strengths, but they introduced a visa requirement where families have to have three years of the education cost and accommodation to get a visa. Then they wonder why 20,000 Chinese students have stopped coming here. That is ignorance and incompetence. They are obsessed with taxing, spending and borrowing. That drives every policy of this government. They are an old-style socialist government—under pressure all they know how to do is tax, spend and borrow. This mining tax is nothing but a tax grab, pure and simple. It is a tax that will discourage investment. It is a discriminatory tax.
Let's look at where it falls. In research released today by BDO, a major research group, the mining tax liability on Rio Tinto was calculated for the first five years, and it was zero, zero, zero, zero, zero. They calculated the mining tax liability on BHP, and you will not be surprised to learn that, for the first five years, it is another five zeros. They have taken the real-life numbers of a small emerging miner who is making revenue in the order of $600 million to $700 million and calculated its mining tax revenue: first year—2012—zero; second year, $49 million; third year, $107 million; fourth year, $96 million; fifth year, $68 million; and the following year, $63 million. So we are seeing a total effective tax rate of 40.18 per cent in the first year in which they pay the tax, 45.68 per cent in the second year; 45.76 per cent in the third year, 46.12 per cent in the fourth year, and 46.20 per cent in the fifth year.
This is a scandal. We are putting a lead weight around the neck of our greatest strength in this economy. When you look at our competitors around the world—and they are significant, they are large and they are coming at us as they invest in infrastructure to move a mountain of resources that exist around the world—the highest effective rate of tax including royalties is 40 per cent in Canada. We are talking about mid-tier companies paying a 46 per cent effective rate of tax with this new tax. In other countries, such as Brazil and Mongolia and other major future competitors, they are paying in some cases as low as 30 per cent and less. This tax is a lazy and short-sighted attempt by an incompetent government to prop up its budget. That is all it is.
Let's for a minute examine the myth that the minerals sector is somehow not paying its way. They paid very little in 1999, but by 2002-03—when the mining boom was just taking off—they paid around $6 billion in taxes including royalties and corporate taxes. In 2010-11, that figure exceeded $23 billion, a fourfold increase. The profits-based company tax was in the order of $4 billion in 2002-03. That grew to nearly $15 billion. A massive new investment over the next four or five years and the reduction in costs offsetting profits will mean that revenue will continue in a very strong way, depending on the price of the product. So with the existing taxes we have a fourfold increase which is likely to get much higher in the next three or four years, yet the government wants to come in with a carbon tax and a mining tax which will add billions and billions to the tax that these companies are paying, and the effective rate of tax will head towards 50 per cent. This is nonsense. At a time when we should be locking in all of the potential investment that this great resources sector can produce, we are inviting competitors around the world as we see a supply response coming down the line. We think we are awash with resources, and we are. Our iron ore is 13 per cent of the world's supply, and our coal is 15 or 16 per cent of the world's supply. But there are mountains of it elsewhere, and this government is oblivious to that. They are inviting competition, they are ensuring that we will not be competitive and they are taking great risks. They have spent this money before they have earned it.
Then there is the prospect of China. Global reports came from Paul Wiseman yesterday that China's comedown is being engineered by its policy makers. They want to slow expansion just enough to cool inflation. If they get down to six or seven per cent growth—which will cool inflation—China will still have strong growth, but there will be a 15, 25 or 30 per cent reduction in prices. This government is vulnerable: our structural deficit at the last budget was twice Germany's and was 30 per cent higher than even Italy.
Mr Champion interjecting—
The member for Wakefield smiles. He does not understand what a structural deficit is.