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

I rise to make a contribution on the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013. We are not here because of sound economic policy, sound social policy or sound policy of any description. The chamber is being asked by the Liberal-National government to abolish the minerals resource rent tax. In doing so, the coalition is asking us to short-change generations of future Australians so that the coalition can implement its election slogan. The commitments made by this government during the election were based not on any research, policy or wide-ranging analysis of what is good for the country but rather on what they could do to get into government at the time. One of these commitments was to scrap the mining tax. It was a three-word slogan that had no policy substance.

The contrast between this side of the chamber and those on the other side could not be starker. On one side we have those that believe all Australians should receive their fair share of economic benefit from our rich endowment of natural resources, while on the other they intend to leave the majority of people across Australia out in the cold. It would seem that those opposite believe that the wealth that comes from the soil we all own should be enjoyed by a minuscule minority. They would have us believe that leveraging a boom in our natural resources to invest in education, infrastructure, superannuation and small business is somehow a bad thing.

This is the con I will talk about today. The coalition intend to deny the Australian people these investments by selling them a duplicitous message that the MRRT will somehow put the mining industry to slaughter, while at the same time they benefit from the largesse of the mining industry. We on this side of the chamber will not be falling for it. It is important to look both at what this nation stands to lose and at what the coalition stand to gain if this repeal bill is passed. It is important that we examine the benefits of the MRRT as well as its strength as a tax. It is important that we analyse the motives underpinning the coalition's desire to abolish it.

The minerals resource rent tax is designed to reap the benefits of the mining boom and spread them fairly across Australia. The MRRT does this in several ways. Firstly, it funds an increase in superannuation for low-income earners. This is sound public policy in every way. As the population ages it will be low-income earners that are more reliant on the age pension, putting an even greater burden on the public purse and hampering the government of the day's ability to invest in infrastructure and other vital services. By using profits from the mining boom to increase super contributions for low-income earners, we are able to reduce their dependency on social welfare during their retirement years. This is a long-term policy that will reap immense social and fiscal benefits for the government over the coming decades. These benefits are underpinned by around $2.7 billion worth of investment in superannuation enabled by the funds raised by the MRRT. Indeed, by spending now we are able to save money in the future by enabling low-income Australians to be more independent in their retirement.

Secondly, the MRRT is being used to fund the schoolkids bonus, which is designed to give families $410 per primary school student and $820 per secondary school student in order to help parents pay for the needs of their kids' education—things like books, school uniforms and computers which aid students' learning. It is a policy aimed at reducing the cost-of-living pressures associated with the vital need to educate this nation's kids. By targeting middle- to low-income earners, this policy is effectively means-tested. As such, funds raised by the MRRT to be spent on this scheme are spent in an efficient and targeted way. As a government we identified those Australians most in need of a helping hand with expenses regarding their kids' education and devised a revenue mechanism capable of underpinning such a policy.

Added to this, the funds raised from this tax permitted our government to embark on other bold policies, all of which were aimed at improving the lot of ordinary Australians—something the coalition talk about a lot for the purpose of politicking but something they simply do not believe in. Indeed, their actions speak louder than their flimsy rhetoric—

Photo of Sean EdwardsSean Edwards (SA, Liberal Party) Share this | | Hansard source

Are you kidding me?

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

No, I am not, Senator. MRRT revenue was being put to use in establishing the regional infrastructure investment fund and the Regional Development Australia Fund. The Labor government was taking revenue raised by the mining boom and putting it back into rural and regional communities. This ensured that, when these mining projects wound down, such communities were not being left out in the cold. These investments totalled more than $2.6 billion over the next decade. By anyone's measure, this is a substantial amount of investment in rural infrastructure that has been flushed down the drain by the coalition.

The National Party, the alleged party of rural communities, were complicit in this decision. It is a shameful act that shows little regard for the needs and desires of their constituents. Because of their subservience to the Liberal Party, clearly the arrogant big brother of the coalition, the National Party are throwing countless rural communities onto the economic scrap heap, depriving them of the infrastructure they need to develop both their communities and their economies. That the National Party can be so narrowly focused on the big end of town rather than their own backyard proves how irrelevant they have become when it comes to making the big calls that will have a genuine widespread and positive effect on their constituencies.

Though the National Party is guilty of holding its constituents in contempt, so too is the Liberal Party, the supposed guardian of small business. The MRRT permitted a $5,000 instant asset write-off for small business. It meant that the government was there, well and truly supporting the needs of small business to reinvest in their enterprises. The Liberal Party's desire to scrap the MRRT will reduce the instant asset write-off from $5,000 to $1,000. This means that small business is now five times worse off under the coalition.

Overall, it is projected that the abolition of the MRRT will suck almost $14 billion worth of investment from our economy across a range of areas, including small business, working families, infrastructure developments, social welfare and superannuation. We had in place a mining tax policy that distributed wealth across a wide range of economic sectors; it did not favour one over another. It is equitable; it is fair; it is intelligent. This is why it is so baffling that the Liberal-National coalition wishes to rip all of this up. It is baffling that the coalition is prepared to preserve a similar tax, the petroleum resources rent tax, but not the MRRT. This is a dubious double standard—

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

It is totally unrelated.

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)

1:58 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

I thank Senator Tillem for that speech and I wonder if we could borrow a copy of it so I could make it available to the good voters of Western Australia for next Saturday week!

Today we have seen the Labor Party knock off a bill to knock off the carbon tax, the tax that cost so much and which is so important to the state of Western Australia. Here they are wanting to retain the mining tax that is so debilitating to jobs in Western Australia. I cannot believe that the Labor Party have any interest in winning senators from Western Australia, because these two actions to retain the carbon and mining taxes are very bad news for the people and economies of Western Australia. I hope Western Australians are watching.

Debate interrupted.