Tuesday, 22 November 2011
Matters of Public Importance
Labor's mining tax is a bad tax from a bad government which came out of a bad process. When bad governments like the Gillard government do bad things badly, as with the mining tax, they inevitably go for the cover-up. They try and keep stuff-ups that they have done along the way secret, they try and cover up their actions and they try and cover up the impact of their actions because they are embarrassed. The government's actions and the outcome of its actions are there for all to see—the dog's breakfast which is the MRRT negotiated exclusively and in secret between the Prime Minister, the Treasurer and the three biggest mining companies in Australia while all of their competitors were excluded. People across Australia well understand that there is a lot this government is trying to cover up because it would not withstand public scrutiny. We should just pause for a moment to remind ourselves how this whole process started. Former Prime Minister Kevin Rudd commissioned the Henry tax review. The Henry tax review was supposed to be this once in a generation opportunity for root and branch reform of our tax system, to make our tax system simpler and fairer. Of course, what we have ended up with in this mining tax is a new multibillion dollar tax on an important industry for Australia which is manifestly more complex and less fair than the status quo. With any new tax, the things the parliament is interested in scrutinising and the things that people across Australia are interested to know are how much revenue it will raise and whether the revenue assumptions that the government has based its revenue estimates on are credible, whether they withstand scrutiny. Similarly, with any promises to spend money and any promises that are attached to the revenue from a particular tax, people across Australia and in the parliament want to know how much it will cost, whether the costs are legitimate, whether they are properly founded and whether the government has done its homework properly.
If the government comes up with a new tax, you would like to think that the budget overall will be in a better position than when you started. In relation to both the revenue that is to be collected from the mining tax and the cost of all of the promises that the government has attached to the mining tax revenue, this government has been ducking and weaving and avoiding public scrutiny. The Senate, through various committees and through orders of the Senate passed by this chamber, has asked the government to release the mining tax revenue assumptions—commodity price assumptions, production volume assumptions—to enable proper scrutiny of whether the revenue the government tells us is to be raised from the mining tax will eventuate. There are very serious question marks in relation to this.
We have to remind ourselves that this government negotiated this tax, this dodgy deal, with the three biggest mining companies, who are quite relaxed about it. People argue that the reason they are so relaxed about it is that they will not actually end up paying the tax. This is a deal that the Prime Minister negotiated exclusively and in secret, behind closed doors, without any direct involvement from Treasury, without any direct involvement from any official. It was a negotiation directly between the Prime Minister, the Treasurer and the Minister for Resources and Energy and the managing directors of these big multinational companies. Rumour has it that the mining tax deal was typed on the BHP computer and that it was signed there and then by the Prime Minister, the Treasurer and the Minister for Resources and Energy.
The government claimed at the time of the deal that it would raise $10.5 billion, and people were surprised. How come it will still raise $10.5 billion when the original resource super profits tax was supposed to raise $12 billion and the government has made many concessions? People were surprised that there was going to be what was on the face of it such a small fiscal impact, such a small impact on the budget bottom line. What this secretive and non-transparent Treasurer failed to fess up to at the time was that the government, behind closed doors, on the quiet, had made some significant changes to the underlying assumptions. They had made some significant changes to the commodity price assumptions, to the production volume assumptions and to about 100 other assumptions.
Are we allowed to know what these assumptions are? No, we are not. But what we do know is that, if the changes in those assumptions had been applied to the original resource super profits tax, rather than $12 billion it would have raised about $24 billion over the first two years. Out of the $10.5 billion from the MRRT over the first two years, $6 billion was based on changes in assumptions. The government says, 'We can't possibly give you those assumptions because those revenue assumptions are based on commercial-in-confidence data provided to us by the big three mining companies with whom we negotiated this tax.'
So not only are those big three mining companies allowed to design the tax but they are also the only ones allowed to know what the government's assumptions are. Here we have a government that negotiated a tax which helps those big three mining companies to further concentrate their market power, a tax which gives those three big companies an unfair competitive advantage and makes it harder for smaller local miners—those aspiring to be the BHPs and the Rios of tomorrow—to compete with the big three. But we are also told that the big three are the only ones allowed to know what the government's assumptions are. The parliament is not allowed to know. The people of Australia are not allowed to know. All of the competitors of those big three who were sitting in the closed room with the Prime Minister and the Treasurer are not allowed to know.
This mining tax package is a serious fiscal train wreck in the making. The cost of all of the promises that Labor has attached to the mining tax will be higher than the revenue the MRRT is expected to raise from 2013-14 onwards. That is a situation that will become worse and worse, year in, year out. That is because right now we have record terms of trade. We have the best terms of trade in 140 years. We have high commodity prices. As we have high commodity prices, there will be a supply response around the world. Other suppliers of iron ore and coal will come onto the market and increase the supply, which is why Treasury expects that over time the revenue from the mining tax will trend down—and Treasury information released under FOI earlier this year about the revenue expectations shows this. It is a highly volatile revenue because it changes with the commodity price. It changes with fluctuations in the exchange rate. It changes with a range of variables. But what we do know is that it is trending down over time. The cost of all of the promises that Labor has attached to the mining tax will continue to increase, increase, increase.
The Senate inquiry into the mining tax has conservatively estimated that over the next decade the cost of Labor's promises attached to the mining tax will be about $20 billion higher than the revenue it is going to raise. And that was before decisions were made in Western Australia, New South Wales, Tasmania and South Australia to make changes to their royalty arrangements in relation to iron ore and coal. The changes to the royalty arrangements in New South Wales and Western Australia alone have blown a $3 billion black hole in Treasurer Swan's budget, because of the dodgy mining tax deal that the Prime Minister and the Treasurer signed up to with the big three miners. They have promised to credit all state and territory royalties against any MRRT liability. This incompetent government never even thought to talk to the states and territories about their intentions in relation to royalty arrangements into the future before signing on the dotted line. Here we have Prime Minister Gillard and Treasurer Swan promising the managing directors of BHP, Rio and Xstrata that they are going to credit all of the state and territory royalties, and the Prime Minister and the Treasurer were too incompetent to ask Premier Barnett, Premier Rann and the Premier of New South Wales at the time, Kristina Keneally, what their intentions were in relation to their royalties into the future.
This is where this government just does not get it when it comes to tax reform. This government are so addicted to spending and so desperate for more cash that they are always looking for another ad hoc tax grab, but they have not got the time to go through the proper processes. They have not got the time to do the hard yards when it comes to tax reform. Genuine tax reform in this area—resource taxation and royalty arrangements—needs to be based on proper engagement between the Commonwealth and the states. This is a terrible government—and there is a lot of evidence on that—and they are pursuing a bad tax which came out of a bad process. Of course this parliament should not go ahead with it. The Greens in this chamber should join with the coalition to force this Labor government to release all of the secret information in relation to the revenue and the cost of the related measures. They can do it. (Time expired)