Senate debates

Thursday, 20 March 2014


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

1:38 pm

Photo of Mehmet TillemMehmet Tillem (Victoria, Australian Labor Party) Share this | Hansard source

It is not unrelated. It is exactly the same tax operating the same way. The petroleum industry did not pack its bags and leave this country; as a matter of fact, it is prospering. It is a fallacy. Why do the Liberal-National coalition support a tax which effectively works the same way as the MRRT but applies to petroleum-based natural resources rather than other minerals like coal and iron ore? What is the difference? The two tax mechanisms are virtually the same. It is a complete contradiction that defies common sense. Why do the coalition wish to ignore the needs of the majority of Australians?

This government can ignore the needs of most ardent bases of support, in favour of one of the wealthiest economic minorities not just in Australia but in the world. It is an act of shame that eludes description. For the National Party there are two possibilities: either they would rather keep the mining industry happy by securing its already bulging back pockets than build roads, rail and other infrastructure in rural communities for predominantly National Party voters; or the National Party are so irrelevant that they now completely lack the ability to stand up to their so-called mates in the Liberal Party, even if this means cutting the throats of their own constituents.

Comparatively speaking, however, the answer regarding the Liberal Party is much clearer. Put simply, the Liberal Party would rather collect its campaign donations from the mining industry than better enable small business owners to invest in their enterprises.

Senator Ryan interjecting—

To put things into perspective, it has been reported that mining industry donations to the Liberal Party quadrupled, Senator Ryan, from 2009 to 2010—around the time the MRRT was announced. This figure has reportedly climbed by another 50 per cent, to reportedly sit around the $3 million mark. Clearly the Liberal Party sees this as being more valuable than the interests of Australians. If this is not a slap in the face to Australians then I do not know what is. This government has made it clear that it values the wants of the few well and truly above the genuine needs of the many. It does this because it benefits from being the mining industry's sacred keeper. It offers a service to the mining industry by protecting its exorbitant profits and is remunerated handsomely in the form of campaign donations. This is a government that clearly puts the needs of its party ahead of the needs of the Australian people.

The motivation behind abolishing the MRRT is something that the government has not come clean on. It is refusing to acknowledge the fact that this resources boom is an ephemeral phenomenon that will ultimately come to an end. It thinks that it can cash its cheques from the mining industry now and worry about the ramifications later. It is the boom that has put billions and billions of dollars into the coffers of the mining companies, who are about 80 per cent foreign owned. Consequently, we have a once-in-a-lifetime opportunity to get our policy settings right in order to maximise the benefits we are able to reap from this resources boom. It is here now, it will not be here forever and it will not come again. It is because of this that leveraging the mining boom through an appropriate taxation scheme is an absolute imperative for any sensible government interested in governing for the long-term benefit of all Australians.

These resources, such as coal and iron ore, can only be mined once. They are raw materials that cannot be replenished. Though we are currently the beneficiaries of our mineral wealth, once this wealth has been exhausted we will be unable to capitalise on such an opportunity ever again. It is vital that we as a country do not shy away from this opportunity. It is vital that instead we harvest the wealth of the mining boom and plant the seeds of growth and opportunity in other parts of our economy to prepare for the day that our economic success can no longer be supported so strongly by the mining sector.

To put things into perspective, Geoscience Australia estimates that minerals exports accounted for over $150 billion worth of our exports, or over 50 per cent of total exports in the year 2011-12. Though there may be short-term uncertainty over international demand for our mineral wealth due to global economic fluctuations, one thing is certain: Asian nations will continue to develop and will continue to call upon us to provide them with the raw materials they need to facilitate this. This means that in the longer term we can expect the value of our mineral exports to continue to rise. As such, it should be incumbent upon governments of all persuasions to see that this wealth is distributed across Australia so that each and every one of us is able to benefit from the natural advantages we have been blessed with.

Though the prosperity stemming from our mining industry appears to be capable of running for years yet, it will ultimately come to an end. This could occur due to several possible reasons. Firstly, growth in Asia will reach a critical mass where it then stabilises, reducing demand for our raw materials. Secondly, technological advances in energy production and synthetic materials could reach a point where traditional raw materials such as coal and iron ore are no longer required. And, thirdly, whether we like it or not, our own mineral resources will inevitably be depleted to the point where we are no longer able to mine them. Therefore, we must—pardon the pun—strike while the iron is hot. If not, we will rue the day that, having had all of our mineral resources depleted, we have little, if anything, to show for it in terms of developing our own economy.

Those opposite would argue that the MRRT places mining operations in this nation at a competitive disadvantage. They scream that it is a 'great big new tax on mining' and they accuse us of putting mining operations out of business. These arguments all exist well and truly beyond the realm of fact and reason. We know that, unlike other enterprises, mining operations are allocated according to the location of a given mineral resource In other words, a mining operation can only be established where there is something to mine. This fact immediately excludes a vast section of the globe from being competitive in the mining sector. A report conducted by the Australian Bureau of Agricultural and Resource Economics in light of the Henry tax review concluded that governments should not reduce taxation rates to compete for mining investment and said, 'Potential rents to be earned from the deposit are specific to a particular location.' This suggests to us that Australia has an immense competitive advantage in the international market due to the quantity, quality and accessibility of our mineral resources. I urge senators to read the report.

This same report stated that international reductions in mining royalty rates around the world during the 1980s and 90s did little to attract additional mining investment. Let me repeat that: increases in mining taxes did not result in a reduction in mining investment. I again urge senators to read the report. The report suggested that the relationship between taxation and mining is at best limited in their association with international competitiveness. Indeed, though never acknowledged by the coalition, many other mining countries around the world are introducing profits based taxes on mining operations. These countries include Brazil, Chile, Peru and India, while other nations such as Congo, Ghana, Mongolia and even the United States have also increased their own tax and royalty regimes on mining operations. In looking at this evidence, for the coalition to argue that Australia is unique in its efforts to leverage benefits from the mining boom is a furphy.

With that said, it is important that we identify other factors affecting competitiveness in the mining sector. The other major factor is sovereign risk. Put simply, the stability of governments around the globe is a major factor affecting mining enterprises establishing operations in a given location. Mining companies are clearly less likely to establish a mine in a country they deem unstable, where such instability has the potential to affect not only the viability of a mine but even its existence. By this measure, Australia clearly possesses a competitive advantage. We have a stable system of government where physical and political risks to mining enterprises are largely non-existent, making us an attractive option for investment from a mining perspective regardless of what those opposite might say.

Finally, there is one point I would like to make in this chamber. Though those opposite like to pat themselves on the back and call each other economic gurus, these gurus have never acknowledged flaws in the way mining operations are taxed as an alternative to the MRRT.

Government senators interjecting—

There are many gurus yelling across the chamber. Mining operations have for some time been taxed at a state government level through a system of royalties.

Senator Heffernan interjecting—

It's good to see that the senator opposite has woken up from his slumber! In Western Australia minerals extraction is taxed by a system of ad valorem and specific-rate royalties which return about 10 percent of the mine-head value of the resource. In Queensland a similar tax regime exists except that it is made more complicated by a sliding scale of taxation which is dependent upon the actual mineral being extracted. Both systems are undeniably problematic. Such royalties are completely inflexible in that they tax a mining enterprise regardless of how profitable it is at a given time. How can the coalition attack the MRRT while accepting a royalty regime as indiscriminate and clumsy as this?

Unlike these royalty regimes, the MRRT, as we know, applies to mining enterprises only during a specified band of profit. If an enterprise is unprofitable at a given point in time, it will be excluded from paying the MRRT. It is because of this that the MRRT is a tax that actually cushions mining enterprises from the perils of harsh and unreasonable taxation. Yet, unfortunately, there has never been any acknowledgement— (Time expired)


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