Senate debates

Tuesday, 18 March 2014


Minerals Resource Rent Tax Repeal and Other Measures Bill 2013; Second Reading

6:20 pm

Photo of Dean SmithDean Smith (WA, Liberal Party) Share this | Hansard source

It is a particular pleasure as a Western Australian senator to rise to speak to the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 and make a contribution to this debate about repealing the former Labor government's mining tax. I am surprised that Senator Ludlam has not rushed into the chamber to ask Senator Wright to sit down, because if Western Australians are listening to the broadcast today they would have heard Senator Wright talk about 'strengthening' the mining tax. They would have heard Senator Wright talking about the mining tax being 'a shadow of itself'. Senator Ludlam is going to pay a very heavy price for that speech on 5 April. I hope it goes viral.

There is no better symbol of the Labor Party's complete inability to understand Western Australia than its continued support of this tax. It is no coincidence that Labor's federal representation in Western Australia now stands at a historic low. Labor's primary vote in Western Australia on 7 September last year was just 28.7 per cent. Senators on the other side will not be surprised by that because I regularly refer to it in this place, but there is a very good reason for that. It is because Western Australians have formed the view—correctly, in my mind—that over the last six years of the Rudd and Gillard governments they were seen as a cash cow for Canberra. Labor was more than happy to take Western Australia's money yet reluctant to spend it on any West Australian initiatives or listen to the concerns of Western Australians across a range of issues. Together with the carbon tax, Labor's mining tax will forever serve as a prime example of the former government's complete fiscal and political ineptitude.

The mining tax has long history. It runs like a river through almost all of the previous government's time in office. Along the way, it caused division and suspicion within the government, significantly contributing to the downfall of one Prime Minister and haunted another right through to the very end of her period in office. However, of greater concern to me is the damage this tax has done to Australia's mining and resources sector, which is so vital not only to the interests of my own state of Western Australia but it also underpins the ongoing strength of our national economy. The fact at the moment is that, when Western Australia is diminished, we are all diminished.

What we have now come to know is the minerals resource rent tax had its genesis in the Henry tax review, which was commissioned by the first Rudd government. That review put forward the idea that became the resource super profits tax. The original forecast was that this tax would raise just under $50 billion in the five years from July 2012. This tax was lobbed, like a grenade, into the boardrooms of Australia's mining companies. It was announced by former Prime Minister Rudd and the former Treasurer, the member for Lilley, with virtually no consultation whatsoever. Needless to say, the reaction from the mining sector and much of the wider community, particularly in Western Australia, was swift and savage.

The Rudd Labor government seemed genuinely surprised by the intensity of the opposition to its plan, which goes to show you how much Labor understands the nature of business in Australia and goes to show how much Labor understands Western Australia. The mining companies, as is their right, worked together and developed an advertising campaign to alert Australians to the broader implications of this tax and the damage it would do to our economy overall. Labor's reaction was to do what it does best: launch a political advertising campaign in opposition using taxpayers' money. It is perhaps an insight into the siege mentality under which former Prime Minister Rudd operated, but what is often forgotten in discussion surrounding the mining tax was that the former Prime Minister regarded it as a matter of the utmost importance.

We all recall his pronouncement that climate change was the 'great moral challenge of our time'. Less well remembered was his strident insistence that the introduction of his mining super profits tax constituted a 'national emergency'. I refer to a report from The Age on 29 May 2010, which reads as follows:

The Rudd government has crashed through its own accountability guidelines to rush $38 million worth of tax reform advertisements to air in an effort to counter a negative blitz by the mining sector.

… … …

In order to rush the campaign to air, the government suspended its own processes for having officials check that advertisements are free from party political content.

Special Minister of State Joe Ludwig has scope to ignore the guidelines in cases of national emergency, extreme urgency or 'other compelling reason'.

That is an insight into the mindset of the Labor Party. A group of private companies choose to spend their money to highlight the dangers of government policy, and Labor responds as though it were wartime, suspending normal processes and virtually declaring a national emergency in order to use public money to suit its own ends—this from the same Labor Party that now comes into the Senate and preaches about transparency and accountability. Of course, it was wartime, but the war was happening inside the government.

For those senators who may not yet have had the chance, I commend to you an excellent series of articles in the Fairfax press last year by Peter Hartcher, which examine the collapse of the previous Labor government in lurid detail. It is a five-part series, but part 3 is particularly instructive as it sets out events surrounding the coup that removed Mr Rudd as Prime Minister in June 2010. It is worth placing on the record the key role the mining tax played in those events. The newspaper report says:

The mining tax was the policy backdrop to the political machinations. After breaking an election promise by postponing the carbon emissions trading scheme, Rudd had launched immediately into the announcement of a super-profits tax on coal and iron-ore.

Ferguson says: We announced the tax on the Sunday. By the end of the week we had lost the debate. The industry had been told that the potential revenue would not be included in the forthcoming budget. The next week, it was not only booked in the budget, it was allocated to be spent.

The article goes on:

A furious Rudd privately blamed Swan for bungling the consultations with the companies and the states. Swan denied the accusation.

Of course, we know what happened the following month. Mr Swan banded together with former Prime Minister Julia Gillard to knife Kevin Rudd. The Gillard ascendancy also meant the super profits tax was off the agenda, replaced by the minerals resource rent tax—the tax that the coalition is now determined to abolish.

When former Prime Minister Julia Gillard came to office, she set about portraying herself as the great negotiator, presumably in contrast to the autocratic approach of her predecessor. The MRRT was portrayed as exhibit A of the new Prime Minister's marvellous, conciliatory approach. So let us take a look at what Australia got as a result of this arrangement, an arrangement that she struck with Australia's three biggest mining companies. It is worth remembering that the negotiation was very, very limited. The first point was that the revenue-take from the tax was significantly revised, from the almost $50 billion projected under Kevin Rudd to around $26.5 billion under the new iteration negotiated by Prime Minister Gillard. That was the first reduction in the revenue forecasts. It was not the last.

Labor's inability to get the basics right was demonstrated again and again, as we saw write-down after write-down in the projections of what the mining tax would raise. In February last year, the then Treasurer, the member for Lilley, who was instrumental in the negotiations that delivered the MRRT, was forced to concede that in the first six months of its operation, the mining tax had raised $126 million. That was $126 million from a tax that was designed to raise tens of billions of dollars. So former Prime Minister Gillard's much vaunted negotiating skills and the member for Lilley's economic management skills succeeded in creating a tax that raised virtually none of its projected revenue yet added significantly to business compliance costs.

There are only around 20 companies in all that have actually had to pay the mining tax yet there are around 145 other mining companies that have been required to submit all the paperwork for it. So around 145 companies were required to pay accountants, lawyers and other advisers so that they could meet the compliance requirements and submit paperwork for a tax they ultimately have not been required to pay. How many millions of dollars has this wasted? How many jobs could have been created or what new projects could have been supported had this government not erred so appallingly in the design and implementation of this mining tax?

This is a real tribute to Labor's economic skill—a tax in its design that significantly increases business costs in the mining sector, harms economic growth and jobs creation in the resources industry, destroys a Prime Minister, yet at the same time raises no revenue. It is a remarkable accomplishment! Only the Australian Labor Party could have done it and, bizarrely, they are still defending it.

Senator Gallacher interjecting—

Is that a defence, Senator Gallacher?


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