Senate debates

Tuesday, 18 March 2014


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

1:03 pm

Photo of Christopher BackChristopher Back (WA, Liberal Party) Share this | Hansard source

This debate offers a unique opportunity for the Australian Labor Party and particularly its leader, Mr Shorten, to come into this chamber through the Leader of the Opposition in the Senate and support the repeal of this mining resource rent tax. Mr Shorten has the opportunity to right a wrong. He has the opportunity to stop the cheap political game scoring that we saw last evening with the filibustering on the carbon tax. He has the opportunity to actually take some leadership, which he at the moment is so badly lacking. A lifeline has been thrown to him by none other than three people this morning who actually have assisted him in his decision making: the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Minerals Council of Australia.

Last week Mr Shorten was in Perth, and Perth is a long way from Canberra, Mr Acting Deputy President Whish-Wilson, as you know and you recall, having once been a Western Australian. The closer he got to Perth, the more the heat went on him about the need to repeal this mining tax. So what did he do? He vacillated and said, 'I can't make a decision now, I have got to consult with industry.' Well, these three people have helped him from having to make the trip to Perth with the enormous cost associated with it and no doubt the cost of the carbon tax in the airline flight. These three people have said to him through their agencies that it is important that the mining tax should be repealed now. They went on and made the point that the industry pays some $20 billion a year in company tax to the Commonwealth, and if we were to listen to the last two contributors you would think the mining industry pays nothing to this country. Since 2006-07 the mining industry alone has paid $117 billion in company tax and state royalties. This is just the company tax and the state royalties, not all the income taxes, not all the other impositions, not all the payments to local governments et cetera—since 2006-07, $117 billion. I call on the Leader of the Opposition, Mr Shorten, today to come in here and to join with the government and do what he knows must be done, and that is to repeal this legislation.

There are two issues that Mr Shorten would have learnt about in Perth the other day that have caused the Labor Party to be held in such low regard in my home state of Western Australia. They are the minerals resource rent tax and the carbon dioxide tax. Why have they affected Western Australia so greatly? It is because, as you know, Mr Acting Deputy President, we are the state most affected. We are geographically the largest state with the cost impositions on the transport industry, which of course has an impact on every Western Australian, and with the impact of the mining tax on iron ore, and we know very well that WA leads the nation by providing some 47 per cent of the export-earning wealth. Mr Shorten has the opportunity to win back some respectability lost by the then Labor government, including statements like, and not exclusively, that of Prime Minister Gillard winning the 2010 election with a statement, 'There will be no carbon tax under a government I lead.' There would not be a person in Australia who would dispute the fact that the Labor-Greens government governed from 2010 to 2013 because of that duplicitous statement.

We know that the first iteration of the mining tax, the resource super profits tax, got nowhere and never was it going to. The impact it would have had on the Australian economy through the Western Australian economy would have been disastrous. Contrary to the advice of Senator Ludlam a moment ago, when he was making the point that Mr Martin Ferguson rewrote the tax policy, Mr Martin Ferguson, as I understand it, was excluded from the dialogue between then Prime Minister Gillard and then Treasurer Swan in their negotiations with the three majors—BHP, Xstrata and Rio. Imagine putting those two, with the number of years of business experience that they have, with the chief financial officers of those three major mining companies. All of the small mining companies were excluded. We in fact know the end result of that: it got nowhere.

Mr Shorten has the opportunity to right the wrong of the incompetence delivered by the last Labor government on the people of Australia, particularly when it comes to the mining tax on Western Australians. The government at the time were told by many, many people—the coalition itself, industry and others—that there would be no nett revenue from the mining tax. The prediction was for some $3 billion in revenue in the first year and $22.5 billion in revenue over the first four years. We know now, as history records, what the government of the day were told. Indeed, the Leader of the Opposition in the Senate, Senator Wong, who is here now with us, can confirm that she was told again, again and again how little it would yield. It yielded $126 million in the first six months and $400 million for the first year, and it was paid for by some 20 companies. It is conveniently forgotten that there was $40 million in costs to advertise its advantages, $50 million in set-up costs and some $20 million a year to administer it. Imagine having a tax that costs the economy! As Treasurer Hockey has said in repealing it: we will be saving the budget some $13.4 billion.

But this is not just about those who paid the mining tax. There are 145 companies that had administrative burdens cast on them; they had to account and be accountable for the fact that they would not be paying the tax. They told the Labor government that they would not have to pay it. Fortescue Metals Group estimates that it paid some $3 million to $5 million in compliance costs—moneys that could have well gone to employment, moneys that could have well gone to further exploration. The then Prime Minister Rudd said:

No government should ever take a backward step in pursuit of the national interest.

I say: neither should they in opposition. Senator Wong and Mr Shorten should reverse that wrong now. Then Special Minister of State, Gary Gray, a person who should have known better as a senior Western Australian minister at the time, himself out of the resources sector, said:

… I don't think it should—

be a burden—

It's a profit-based tax and over the course of the last six and eight months, we've seen significant volatility in the price indexes, particularly for iron ore.

You bet we have. You bet we have seen price volatility. It is the very reason why the Labor opposition should now not stand in the road of repealing this tax. Mr Gray went on to say:

"I think it's worth having in mind there were circumstances surrounding the design of the mining tax that meant the government had to do the best job it could do in the circumstances available to it …

Possibly so. Now the opposition, Mr Shorten and Senator Wong, have the opportunity to right the wrong so eloquently stated by then Prime Minister Rudd, when he said:

No government should ever take a backward step in pursuit of the national interest.

But even more incompetent was the fact that the then government, in predicting that it would earn this $3-odd billion then went and spent it. From your days in business, Mr Acting Deputy President Whish-Wilson, could you ever imagine a circumstance at the beginning of a financial year when you would actually predict: 'I'm going to make $30,000, $300,000, $3 million or $3 billion this year, and I'm going to go out and spend the money'? Worst of all, it was taxpayers' money that was spent.

The then government were making promises associated with superannuation when the money was not there in the bin. They were offering concessions to small business when in fact the money was not there. Small business wants government out of the way. Small business in Western Australia wants the carbon tax and the mining tax repealed so that small business can get on with the business of employing more people and returning their businesses to profitability. Then there was the schoolkids bonus; it is a saving of $1.1 billion. Of course, we would all like to give money now to schoolkids for bonuses, but when you borrow against the funds that those children will to have pay back as adults, is that good business? Is that good common sense? Of course it is not good common sense. The then government went out and borrowed money. They went out and took taxpayers' money to spend in advance of the funds that they thought they were going to get in, and of course, as Senator Nash and I both know and as the world knows, they never, ever were going to get that money in.

It is the sovereign reputation of our country that we have to restore in all of this. As I indicated earlier, Treasurer Hockey made the comment that we will save some $13.4 billion in scrapping a tax that was never, ever going to make any money. Let me make an interesting point to you, if I can, in connection to the sovereign risk and Australia's reputation. Last year, I had the opportunity to spend some time in the United States—and I must say at my own expense—visiting New York, Washington and Texas. When I spoke to businesspeople who knew Western Australia well, they would continually say to me: 'What has happened in your country? You were once a safe place to invest. You were once a place that was a predictable place to invest, where we could spend funds, where we could employ people and where we could create opportunities. What has happened?'

The best example I can give you, Mr Acting Deputy President Whish-Wilson, of the impact of the carbon and mining taxes is the impact on Australian Stock Exchange listed mining exploration companies. As you well know, exploration today means a yield from the mines in 20 years time. If we are not exploring today, the mines will not be there in 20 years time. In the year 2012, ASX-listed mining exploration companies spent two-thirds of their investment time and money in Australia. By the middle of 2013, they were spending two-thirds of their exploration effort, time and money outside Australia. That was the drop in the confidence of the mining exploration industry. And where were they spending it? They were spending it in Canada—Canada was welcoming, with open arms, Australian miners and explorers—and in Asia; in Africa in particular; and in Eastern Europe.

I met with the then shadow minister, now the Minister for Industry, Mr Macfarlane, in Kalgoorlie with a dozen mining explorers—people who do work all around the world, not people who drill small holes in the backyard. One fellow had just brought back his equipment, designed and built in Kalgoorlie, from a project that he had been undertaking, I understand, in Eastern Europe. It had sunk a drilling hole six metres wide and 2,000 feet deep. Imagine the level of technology and expertise to enable that. They were all back in Kalgoorlie and they had no work on.

That was largely the reason why in opposition we undertook to develop the Exploration Development Incentive scheme. It was so that those willing to invest their funds in mining exploration companies, the small companies—not the big boys that end up exporting but those that actually go out there and do the exploring—would get a tax credit for the costs directly associated with their mining activity. That at least gave some increase to the confidence levels of that sector.

What is and what has been the impact of the mining tax on the companies themselves? As I have just prefaced in my comments, it has had the result of sending mining explorers overseas. When CHOGM was on in Perth in November 2012, at the end of the week a group of African leaders sought a meeting with the Premier of Western Australia, Mr Barnett, and they said to him in that meeting, 'Mr Barnett, we didn't realise that the vast majority of the mining activity in our countries is actually administered from within two kilometres of your office here in West Perth.' That is the impact that Western Australian and Australian mining expertise is having around the world in developing countries—countries that can get themselves out of economic demise by virtue of the opportunities associated with the resources sector. How proud are we.

But the simple fact of the matter is that we know very well that there should be the activity and encouragement in our state to actually make this happen. Iron ore contributes some $56 billion of the total mineral sales in Western Australia, and, as I said earlier, our state has the privilege of earning some 47 per cent of the export wealth for this country. We know that coal and iron ore, both affected by the mining tax, are two of the highest export earning commodities in this country.

Senator Polley made a comment earlier, in her contribution, about royalties. It seems to escape those opposite in the Australian Labor Party that there is an Australian Constitution and that, under the Australian Constitution, minerals and royalties related to them are in fact the province and under the ownership of the state. She also said there was a capacity for everybody to enjoy the benefits, and I will in a moment advise how that happens.

The resources sector, as I indicated earlier, paid in the last year and pays on an annual basis $20 billion in tax revenue to the Australian Taxation Office and $4 billion in revenue to the state in royalties. Rio Tinto—not a bank, not an insurance company, but a mining company—is the largest taxpayer in this nation. Forget the nonsense you will hear from others that in some way the resources sector is not paying its way tax-wise. It has paid $117 billion in company taxes alone. Mr Acting Deputy President Whish-Wilson, from your business background, which I understand was extensive, you would know as well as I do how you end up getting more tax revenue from companies: you encourage employment; you create a climate in which business activity is encouraged; you remove red tape; you help companies increase their pre-tax profits so they pay more tax; you remove a carbon tax or a mining tax. I call on the Leader of the Opposition, Mr Shorten, a person who has clearly been found wanting in his role, to turn around his leadership aspirations today and support the repeal of those taxes. I ask: where is Senator Louise Pratt—


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