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 am about to quote the minister at the table, Mr Rudd, he will be pleased to know. In an editorial titled 'Pain on the road to recovery' in the Sydney Morning Herald in July 2009, then Prime Minister Kevin Rudd cited official estimates that the mining sector's expansion had delivered a $334 billion boost to Commonwealth revenues in the period since 2004-05. The man who is now the foreign minister was praising the industry for all the taxes it had already paid to the federal government. But that was not enough. We now need another tax on top of all that.
Australian resources belong to all Australians—and that is not new—and it is fair that the Australian people should have a fair share of the benefits of those resources being used in Australia and around the world. That is the foundation of the existing state royalty schemes. Miners do have a responsibility to put back into the community and to partner with regional communities for their social licence. I am not one of those who argue that mining royalties are somehow an inefficient or ineffective tax. The reality is it is a price that miners pay, for using a resource that is essentially owned by the Australian people. I guess, strictly speaking, it is owned by the states, but it is also owned by the Australian people. They are entitled to a fee, a payment, for taking those minerals out of the ground and they are entitled to a payment whether or not the company is making a profit. If they are not making a profit then they are still taking the minerals out of the ground and they ought to be paying a social licence, a royalty, for that.
On top of that we will now have a profits super tax, and that sends the wrong signal. Even in our national anthem we praise the advances of 'wealth for toil'. It is the Australian ideal that the harder you work the greater your rewards. For any government to decide what constitutes acceptable profits—and that, in exceeding this arbitrary threshold, companies need to be whacked with additional tax liabilities—sets a dangerous precedent. Labor's green partners are not satisfied with the super tax just on the mining industry, they want to extend it right across the corporate sector. Every part of business must now be wondering whether they are next.
Never try to be too successful in this country because, if you do, if we have a Labor government it will think up a new special tax to make sure you cannot keep being successful. The very notion that we would seek to bludgeon a successful industry with what amounts to a success tax is certainly sending the wrong kind of signal to all Australians. What happens if farmers, for instance, have a good season and the prices are high in the world and the Americans get rid of their trade barriers and the Europeans get rid of their trade barriers and suddenly farmers make a profit? Are they going to be slugged then also with a superprofits tax of the nature that is proposed for the mining industry?
It is worth remembering that this is only one of 19 new or increased taxes that have been served up by this Labor government in their four years in office. To every problem, this government's response is a new tax, a new regulation or a new bureaucracy. What they should be doing is getting out of the way. It is important that we provide incentives, rather than discourage industry, to invest and to expand. To make matters worse, this government has refused to release all the modelling and assumptions underpinning this flawed mining tax. We do know that they promised to spend $14 billion from the promised revenue from this tax. But the government's forecast revenue for the tax is only $11 billion. We know that even this expectation has now been completely shot. Three billion dollars has been taken from the expected revenue because of additional royalties levied by the New South Wales and Western Australian state governments. That is a $3 billion hole already in the tax revenue from this mess.
It gets even murkier as deals are done with the Greens and the Independents to try to get the passage of this bill through the parliament. On top of that, since all of these estimates were done the price of coal and iron ore has already dropped by 20 per cent. The revenue goes down again and again. It has once again been a botched process from beginning to end. The public have no reason to believe that any of the numbers that have been served up in relation to this tax will end up being close to the mark.
The negotiations—when we got to the mark 2, 3 and 4 versions of this tax—were held with a couple of ministers behind closed doors. They did a deal with a small group of the biggest players in the industry—and those companies did these ministers over. They got themselves into a position where they have a good deal but they shifted the burden onto the miners who were locked out of this process, who never had a chance to put their case.
And now we have a deal with the member for New England, who has really let his constituents down. He promised them he was going to save them from the coal seam gas industry. And what has he got out of all of his negotiations? He has got yet another committee. He said he was going to have $500 million for studies. He settled for $200 million for a new committee.
I do not think that gives anyone in regional communities any confidence at all that the issues of concern to them are going to be dealt with as a result of this deal.
The cost of the various measures that the government is proposing under the whole mining tax arrangement are also obviously undermined by the fact that the government's own projections keep changing. The revenue estimates started at around $12 billion. Then it became $24 billion with revised commodity price assumptions. It went down to $10.5 billion after the mining tax deal and with different commodity price assumptions, then to $7.4 billion because of changes in exchange rates and then to $7.7 billion because exchange rates changed yet again.
Treasury projections of MRRT revenue to 2020 released under FOI indicate that Treasury expects revenue to reduce over time as commodity prices come back to more normal levels. As the previous member rightly referred to, there is now much more competition in this sector, particularly for coal and iron ore. The Brazilians and other South Americans are launching a fleet of vessels with capacities of up to 400,000 tonnes, which are going to take away a lot of the competitive advantage that Australia has in the Asian market. The government does not seem to be taking this sort of thing into account when they make their assumptions about the revenue that this is going to raise in the years ahead. Yet the expenditure is locked in, through things like the superannuation changes and a range of new initiatives that they say are going to be key parts of this package. The expenditure is locked in but the revenue is likely to fall.
So you can see that in doing all of this work on the legislation the government have allowed themselves to become very exposed to the decisions of the states. If the states raise their royalties the federal government revenue goes down. Western Australia, New South Wales, South Australia and Tasmania have already increased royalties, and Queensland has made it clear that it reserves the right to do so as well.
Then there is the question of the constitutional validity of this tax. These are serious questions because the tax is on the resource at the point of extraction. Is it, in fact, a tax on state property, as prohibited by the Constitution? A number of states have indicated that they are likely to take High Court action. Then there is the question of discrimination between states, which is also prohibited under the Constitution. This is another mess and there is no doubt that the government has not thought through the implications of the likely impacts on the measures that they propose to fund from this tax when the revenue continues to fall.
There is another point that I think is worthy of recognition. That is the fact that some 65 per cent of the mining tax revenue is going to come from iron ore production in Western Australia. Dr Ken Henry gave that evidence to the Senate mining tax inquiry. It is extraordinary that a new national tax will raise 65 per cent of its revenue from one single state economy. Is it any wonder that Western Australia is concerned about the impact of this tax?
Genuine and sustainable tax reform can only be achieved through an open, transparent and inclusive process involving all relevant stakeholders, not just a chosen few. The government needs to get its spending under control, then focus on lower, simpler, fairer taxes and genuine tax reform based on a proper process giving everyone a fair opportunity to have their say and be heard. We will continue to vigorously oppose this mining tax in opposition, and when we come to government we will rescind it.