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 to oppose the Gillard government's package of bills that comprise this minerals resource rent tax. I stand with my coalition colleagues, who also oppose the government's measures to reap additional revenue from mining companies who already pay a significant amount of tax and royalties for the right to mine and sell our mineral resources.
The MRRT is a poorly constructed and poorly thought out piece of legislation that attacks the strongest and most profitable sector of our economy. The government's basic argument for implementing this package of bills that make up the MRRT is that we need to tax the mining sector while the going is good because we only dig up the resources once.
I have two problems with this argument. Firstly, Australians do in fact receive 'their fair share', as it were, in three ways: the royalties paid by mining companies to the states for them to spend on roads, hospitals and schools; the tax mining companies pay to the federal government to spend on the PBS, defence and universities; and, lastly, the profits from mining companies which distribute dividends to self-funded retirees, investors and superannuation funds. Now the federal government wants to take an extra chunk out of our most profitable export market. You cannot have your cake and eat it too.
The second problem I have with the 'tax while the going is good' argument advanced by the Gillard government is that it presumes that government is better at spending the money derived from the mining sector, rather than the hardworking Australians and self-funded retirees who have taken the risk and invested their savings and superannuation into mining companies themselves. The government believes it is better at spending taxpayer's money than the taxpayers themselves. This ideology may be familiar to our Prime Minister, the shrewd and benevolent redistributor of the wealth, and to some others on the government benches. It is called socialism. As I have said before, you can take the girl out of the socialist alliance but you cannot take the socialist out of the girl.
The MRRT is about the government shovelling away as much revenue to spend as quickly as they can before voters exact their judgment in two years time. But what will the Gillard-Brown government spend taxpayers' money on next? Will they spend it on more school halls that are not needed, on home insulation schemes that cost more to rectify than they did to actually implement, on more failed GroceryWatch and Fuelwatch-esque projects, on a National Broadband Network that is overpriced and will be rendered obsolete in a decade's time or on another $10 million for the Geelong Football Club? I am sure the Gillard government have plenty of unworthy projects in the pipeline. The less the government have to spend of hardworking Australian's taxpayers' dollars the better.
The mining and resources sector is providing Australia with an enormous injection of jobs and investment that we must rightly take advantage of. According to the Department of Foreign Affairs and Trade, Australia's total goods and services exports reached $284.6 billion in 2010. Of that total, resource commodities, including iron ore and coal, made up 47.5 per cent of Australian exports with a value of $135 billion. Furthermore, Australia registered a $16.8 billion trade surplus, reversing a trade deficit of $4 billion in 2009. The value of Australia's exports increased by 13.9 per cent with the surge in exports led by strong demand and prices for metal ores, minerals and coal.
Undoubtedly, minerals and resources are the backbone of Australia's trade exports. This sector is recording solid growth and will continue to attract investment in the years to come if the government handles the mining boom in the right way.
The Gillard-Brown government's MRRT policy before the House is not the best way to take advantage of this economic boom. The MRRT adds a whole new and uncertain layer of legislation for minerals and resources companies. It adds nearly 287 pages of tax law—it is up from the 161 pages when the government released the first draft. The MRRT distorts the market sector by introducing the market valuation system to calculate applicable deductions as it gives the big three—BHP Billiton, Rio Tinto and Xstrata—significant protection from taxation that has not been made available to smaller and mid-tier mining companies.
Expert independent modelling by the University of Western Australia highlights the unfair and discriminatory nature of the MRRT regime, and shows there will be a significant difference in the level of the total taxation between a mature mine and a new or emerging miner.
The University of Western Australia modelling shows that there will be at least a four per cent difference in the effective total taxation between a project that was in existence before 2 May 2010 and that applying to less advanced or new developments taking place after 1 July 2012.
The big three miners will be able to claim a significant deduction for the market value of their starting base assets, which allows them to reduce their MRRT liability for the remaining life of the mine or 25 years, whichever is the lesser. New, emerging and invariably smaller mining companies will not be able to claim such an offset. The research goes on to demonstrate that under the MRRT a small, emerging miner will be paying an extra six per cent in tax compared to a large, mature miner that will be paying an extra two per cent. The MRRT regime is unfair and, due to the distortion of the taxation liability, places small and emerging mining companies at a competitive disadvantage.
The constitutional arrangements regarding the role of state governments and the impact on their mining royalty rights have been badly mishandled. The state governments have not been consulted about this major reform. Western Australia, South Australia, New South Wales and Tasmania have all rather shrewdly taken advantage of the loopholes left wide open by the Gillard-Brown government and have increased their royalties, which has already hit the federal budget by nearly $3 billion.
Another troubling aspect of the legislation before the House is the timing of the introduction of the tax on the mining sector at the same time the carbon tax legislation will be introduced next year. The MRRT will compound the carbon tax and will make mining and exporting from Australia completely uncompetitive in a global market. The MRRT will tax the profits of mining companies, which will eat into the profits the companies create. Mines will not shut down immediately, despite reduced profits. The colossal capital investment many mining companies have made over the last decade in infrastructure and equipment will ensure that most projects currently up and running will fulfil their life expectancy, if not simply to garner a return on investment.
The power of the MRRT and the carbon tax combined with higher wages, lack of adequate port infrastructure in Australia and fluctuations in the global market will simply deter future investment in the mining and resources sector in Australia. The investment from mining companies will go offshore to markets and economies that do not have a job-destroying carbon tax or a punitive minerals resource rent tax. Brazil, Canada, South Africa and Indonesia are all nations that are happy to take advantage of Australia's economic suicide.
The state governments have seen an explosion in revenue through the royalties regime, revenue which has been invested in roads, railways, hospitals and schools. The federal government still reaps rewards from the mining boom through company taxation. The increase in mining revenues has allowed the federal government to make investment in universities, social projects and defence equipment and provide pension increases and medicines. Australians, at both private and public levels, are already getting a fair share of the mining boom. As profits increase, the private and public pools of money also increase. By imposing the MRRT and the carbon tax, the government is sending the clear signal to the mining industry and the world that Australia is not the place to invest in the future.
I cannot support a package of bills that has been so hastily and secretly prepared, that will drive down investment and competitive advantage in our most important export sector and that will reduce the profits going towards superannuation and investment funds of mum and dad shareholders and self-funded retires. Nor can I support a package of bills that will increase the revenue stream flowing into the coffers of an incompetent, hopeless and economically illiterate Labor-Greens government.