Tuesday, 22 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
I rise tonight to speak on the Minerals Resource Rent Tax Bill 2011 and the accompanying suite of 10 bills. The object of the minerals resource rent tax, the MRRT, as outlined in this bill, is to ensure the Australian community receives an adequate return for its taxable resources, having regard to: the inherent value of the resources; the non-renewable nature of the resources; and the extent to which the resources are subject to Commonwealth, state and territory royalties. The minerals resources rent tax is a project based tax on the economic rents mining companies make from taxable resources, including iron ore, coal—and coal seam gas extracted as a necessary incidental of coal mining—and anything produced from a process that results in coal or iron ore being consumed without extraction, including a number of other gases. The tax will be imposed on a miner's mining profit less its MRRT allowances at a rate of 22.5 per cent.
The proceeds of the MRRT will be used for a number of expenditure items, including: lowering the company tax rate to 29 per cent for small business from 1 July 2012 and 29 per cent for companies from 1 July 2013; increases in superannuation age guarantee and charges; increases in concessional contribution caps for low-income earners over 50; government superannuation contribution tax rebates for low-income earners; increases to small business instant asset write-off threshold and simplified depreciation; motor vehicle deductions for small businesses; a 50 per cent discount on interest income; the establishment of a regional infrastructure fund; standard deductions for workplace expenses; phasing down interest withholding tax on financial institutions; and the abolition of the entrepreneurs tax offset.
Now let us look at the inconvenient truth which no-one on the other side of this chamber wants to address. They take offence at a reality check in relation to their policy. This is indeed a lofty aspiration as these initiatives will conservatively come at a cost of $57.6 billion by 2020. Now let us compare this big spend with the Treasury's modelling of how much the MRRT will actually bring to the government's coffers, which is $38.5 billion dollars. Still no-one on the other side wants to mention that. This is a $19 billion dollar shortfall for the budget achieved in just seven financial years. If we include the additional $2 billion shortfall in revenue as a result of the Western Australian state government's decision to remove royalty concessions, it brings the total shortfall to just $21 billion dollars.
Referring to the abolition of the entrepreneurs tax offset, more than 400,000 of our country's small businesses will be affected by changes to the ETO as part of the Labor government's complex numbers game to make their mining tax look more appealing. Under the potential changes, 145,000 businesses with an income between $30,000 and $65,000, would face a $10 a week, or $500 per year, tax increase. This is still not addressed by anyone on the other side of the chamber. Self-employed semi-retirees, home-based businesses and small retailers are just some of the types of businesses that face a 25 per cent tax increase under the Gillard government's mining tax. No-one mentions it.
In Macarthur, my electorate, there are 9,760 businesses. Of these, more than 95 per cent are small businesses. These businesses are the backbone of our community, supporting local employment and investing back into the community through our numerous local charities, events and causes. I cannot stand idly by and allow this tax to hurt small businesses in my electorate as they too will face this 25 per cent tax increase as a result of the mining tax.
The minerals resource rent tax has arisen from a fundamentally flawed process. This tax is the brain child—and it has been called a number of other things—of a desperate Treasurer and three mining giants. It has been conceived through secret negotiations with the three mining giants, BHP, Xstrata and Rio Tinto, giving them an unfair competitive advantage over the rest of the industry. Both the Prime Minister and the Treasurer have once again snubbed their noses at the idea of industry consultation—shame.
As a result of this grossly and fiscally irresponsible Treasurer, we have a mining tax before us today that is needlessly complex and convoluted. This tax is divisive and unfair to the remainder of the mining industry. It is custom designed by the three biggest mining companies to further entrench their dominant position within the mining industry, all the while placing a huge administrative and financial burden on the small and mid-tier mining ventures that seek to compete with them. This new tax will also place massive compliance costs on sectors which may not necessarily have a large liability under the MRRT, such as the onshore oil and gas sector.
To make matters worse, the Prime Minister and Treasurer have also foolishly exposed the belly of the beast that is the federal budget by enshrining in legislation a full credit for state royalties paid by a company for a mining project. Already state governments in Western Australia, New South Wales, South Australia and Tasmania have increased royalties on iron ore or coal, with Queensland reserving their right to do so in the future. And it is the state's right to do so. New South Wales had to raise mining royalties as the federal government refused to listen to their concerns about the unfair impact the carbon tax would have on New South Wales electricity generators. The effect of the state's decisions to do this is a hit on the federal budget of close to $3 billion dollars, with potentially more to come.
The Treasurer has no right to whinge about this, as he refused to consult with any of the states when developing this fundamentally flawed legislation. Nor should the Treasurer set his attack dog, the Minister for Infrastructure and Transport, onto these states by threatening to reduce federal infrastructure investment. These are states that are merely protecting their revenue streams. Resource-rich states rely on the revenue from mining royalties to help fund important services such as health, education, law and order and transport. Did the Treasurer really think he could have a serious and genuine reform of resource taxation and royalty arrangements without actually engaging with the states? Instead, the Treasurer and the Prime Minister are trying to tiptoe around a real reform agenda.
This brings me to my next point, which is whether or not the MRRT is in fact a tax on state property, which is specifically prohibited by the Constitution. The resource rent tax will have huge implications for all of the state and territory governments. Resource royalties represent 20 per cent of the Western Australian state government revenue, nine per cent of the Queensland state government revenue and six per cent of the New South Wales state government revenue. We are already seeing a number of mining ventures, as well as the Western Australian state government gearing up for a High Court challenge over this issue.
Let us look at the facts. This government does not have a great track record defending itself in the High Court. The fact that the government did not even bother to seek advice from Ken Henry about the constitutional validity of the MRRT does not give much confidence in this arrangement.
The last point I would like to make about this government's latest bungled attempt at tax reform is the impact that the MRRT will have on our international competitiveness in attracting further investment. As the shadow Treasurer pointed out, the chief executive of the South African gold miner AngloGold Ashanti, Mark Cutifani, said on 26 October at a Commonwealth Business Forum in Perth that Australia is one of the top sovereign risk countries in the world on the basis of government policy, its demonstrated behaviour in terms of taxation policy and its inconsistency in policy. This is a huge worry.
The constantly changing and confusing nature of this tax has made international investors much more wary about committing funds to Australian projects. But there is a better way to secure Australia's future. The first step is to stop this lunacy, prevent the MRRT from going ahead and force the government to start all over again. This country needs genuine and sustainable tax reform. This reform can only, and it will only, be achieved through an open, transparent and inclusive process involving all relevant stakeholders, not just a selected few. But, before we embark on any tax reform, it is essential that this government gets its spending under control. I have heard a number of speakers show tonight how out of control it is. Once this happens, true reform based on a proper and fair process can occur.