Senate debates

Thursday, 26 November 2015


Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014; Second Reading

10:39 am

Photo of Larissa WatersLarissa Waters (Queensland, Australian Greens) Share this | | Hansard source

I rise with great pride to speak to the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014, which was a bill introduced by former Senator Christine Milne in this place. It is a fantastic bill, because it goes right to the heart of the fossil fuel subsidies that this government continues to provide to the big mining companies. Even when we have a so-called budget emergency—I am not too sure what has happened to that one—still they were dishing out $10 billion of subsidies in cheap petrol to the big mining companies. It is not as if they need the help. Does Gina Rinehart, with $20 billion in wealth, really need an extra subsidy while the rest of us pay 39c tax on our petrol? I do not think so, but apparently the government still does. This bill would remove that fuel tax credit for big miners and it would say, 'No; you shouldn't get a free ride on your 39c when everybody else has to pay that fuel tax.'

This bill would also scrap the accelerated depreciation for vehicles used for fossil fuel extraction—of course not covering agricultural vehicles. The bill would say, 'No; you can't depreciate the acquisition of these assets faster than anybody else can, just to rip this stuff out of the ground.' Lastly, the bill would scrap the deductions available for mining exploration, which of course is effectively immediate depreciation and it promotes mining exploration. Again, nobody else gets special fast-track depreciation rules. I have looked in great detail at these depreciation rules. This is a free ride that this government gives to the big mining companies—who it is so cosy with—in order to get this stuff out of the ground even faster.

We are heading into a climate conference in just a couple of days, and the Prime Minister desperately needs some good news, He has already done a deal with the National Party, saying that he is going to take Tony Abbott's targets to Paris, in order to shore up his own leadership. We hope that he is searching around desperately for something positive to say to the world. He cannot just stand up there and just not be Tony Abbott. That is not enough. He is taking the targets that are the worst of the developed nations—targets which are between one-third and one-half not as good as the science requires. The Climate Change Authority has said, 'You've got to do at least twice or three times as good in order to even have a chance of keeping to two degrees of warming.' And we know that the science is now saying that even two degrees is too much for our coral reefs, for our biodiversity and for our way of life.

So Prime Minister Turnbull desperately needs some good news in the climate space, and we are very happy to give this idea to him. It is a revenue-raising measure. They are grasping around trying to find revenue-raising measures, and of course raising the GST is the latest measure that is on the table that they keep trying to distance themselves from. Rather than attacking the poor folks, why don't you look at the cheap petrol that you are giving to big mining companies? They do not need the support. In fact, it is the renewable energy industry that could do with a bit more support—instead of the attacks that this government has wreaked upon that industry. We have already seen that the renewable energy target has been completely slashed—sadly with the complicity of the opposition in this place—and now we have free tax breaks going to the big mining companies right when there is an abolition bill on foot for ARENA and for the Clean Energy Finance Corporation. This government has it all back to front.

I think the Australian public had really hoped that there would be a change in policy when there was a change in leader. It is not enough that we have a new Prime Minister who can speak in sentences; we actually need a change of policy—and climate policy is the most pressing change that is needed. Instead, we have this continuation of tax breaks to big miners, which is simply promoting global warming—and it is missing out on revenue raising. We had the Parliamentary Budget Office cost this proposal, and it was found that it would raise $10 billion over three years. Of course, we have a whole range of other revenue-raising proposals as well—like fixing up superannuation, tax breaks, looking at negative gearing and looking at a tax for those who earn over a million dollars. There is a whole range of revenue-raising opportunities that the government could be turning their minds to, but instead they keep wanting to attack the poor. Of course, the GST is the latest in a long line of thought bubbles that will have a disproportionate impact on the vulnerable in this country.

So we are heading to Paris, and we have the worst target of comparable developed nations and we have a Prime Minister who needs to do more than just not be Tony Abbott. At the very least, he needs to remove the abolition bills on ARENA and the Clean Energy Finance Corporation. Those bodies are making money for the government whilst promoting clean energy and, hence, constraining global warming and generating economic prosperity and employment. That is the good news story that Australia is so desperate to hear. Instead we have this government that wants to abolish those bodies and keep tax subsidies for big mining companies to give them cheap petrol.

We put up a bill to say, 'Let's bring in some vehicle fuel efficiency standards', which many countries around the world have, of which Australia does not have any at all. We said, 'Let's bring those in because it will actually help consumers in the long run to save money on their petrol costs.' It was costed at saving about $850 a year. But, no, this government thinks that that is not a great idea at all because they have to review. They are going to look at that in two years time, and in five years time they might do something about it. Wow, what a pace of reform! In five years time we might do something to stop, say, VW dumping their dodgy vehicles on Australia. No, instead let us look at some revenue raising. Let us save consumers' costs and let us take away these unfair subsidies that the big mining companies get when the rest of us have to pay that tax on petrol. These folks, particularly in the coal and gas sector, are perpetuating global warming and stopping that transition to clean energy, which we so desperately need in this nation.

Of course, this comes off the back of a long line of other supports for the fossil fuel sector. The government repealed the mining tax, and we know, as history showed, that they repealed the carbon price. There has been a change at the helm, but there has been no change of policy. This government are still utterly wedded to the fossil fuel sector, and they are still in denial—despite all of their talk of innovation—about the possibility and the excitement of clean energy in this country. It breaks my heart, because the rest of the world is getting it and that transition is on, and we are missing out on economic opportunities. We get that they do not care about the environment, and many of them do not think that climate change is real or driven by humans, but I would have thought that they could see the economic opportunities in making that transition to clean energy.

This is a revenue-raising opportunity. This could save the budget $10 billion over three years. It could help support the clean energy sector, instead of all of the attacks that it has had rained down upon it by this government—the cuts to the RET and the abolition bills that are on the Notice Paper. Instead, we could actually see that positive vision, and that employment generating clean energy future, which Australians want. They get it. We have got the highest uptake of solar in the world. In Queensland we have the highest per capita solar uptake of the whole country. Of course, we have got fantastic sunshine, and people want to not only save money on their power bills but also do their bit towards global warming and towards protecting the Great Barrier Reef from what is the biggest threat to its existence. Things like this that can raise revenue as well as help clean energy and stop the unfair tax break that the big mining companies get is exactly what Australia needs. But instead we see the Prime Minister doing a deal with the Nationals to not change a thing, to keep Tony Abbott's climate policy and effectively to keep our economy in the dark ages.

The coal price has tanked, and many economists are saying that this is not just a temporary dip but is actually now structural decline. Our economy has been very dependent on coal in the past, but the transition is on and, if we do not see that and plan for that, then I am worried about the economic shocks that that will bring, and I am worried about the job losses. We have already seen, in the past three years, huge numbers of coal workers laid off. Where are they going to go? Where is the government's plan for those people?

I have been in Mackay recently. It is funny because I have been asking Senator Brandis about coal recently and he keeps inviting me to Central Queensland. I am happy to inform him that I have just been there. They are desperate for a transition plan. They can see that the Galilee Basin is uneconomic. They can see that there are now 15 banks that have ruled out funding that project. They know those jobs are not going to eventuate. They do not want to stuff-up the Great Barrier Reef or bring even more extreme weather events down upon themselves. They want a positive, long-term solution to employment, and clean energy is it with, of course, other industries like eco-tourism, services, innovation and technology. That is the economy of the future. Instead, we have this prescription from the government to keep propping up the fossil fuel sector—in denial that the rest of the world is making a change—and refusing to raise a good $10 billion over three years.

I invite the Prime Minister to take this proposal to Paris and announce it. We will applaud you for it. It is just one of the ways that we could not only raise revenue but also address global warming.

10:50 am

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

I will start my contribution to this debate in recognising that I respect Senator Waters as a very intelligent senator and contributor to this place. I am sure she is very well read and considers these matters very deeply. I was surprised in her contribution, because I am sure she would be aware that basically no respected economist—not Treasury, not the Productivity Commission and no government agency—in this country considers the diesel fuel tax rebate arrangements as a subsidy. None of them define it as a subsidy for the mining industry. I will go through the reasons for that later.

I would have thought an intelligent and well-read senator like Senator Waters would (1) know that, and (2) if she is arguing a different position,—to Treasury, to the Productivity Commission and to almost every economist that I have known in respected circles in this place—she would deal with those issues. She would have raised them, rebutted them and pointed out why all of these eminent public sector agencies were wrong and the Greens were right.

We have just heard throughout her whole speech not a mention, not even an engagement, on that side of the debate. Instead, unfortunately, we had a contribution that was full of vitriol. It was full of denigrating of a former Prime Minister. It was full of attacks on particular wealthy mining investors. It was full of emotion about free tax breaks to rich people and all these conspiracy theories that the Greens like to meddle in. That is unfortunate because I do believe the Greens have a higher intelligence than that, and they do not need to resort to the lowest common denominator in these types of debates. It is unfortunate that they are not engaging with the real issues on this particular matter. They are certainly not even trying to rebut or put forward an alternative argument to these respected institutions that I will quote from in my contribution.

It is important, when we are discussing any change to a particular tax or rebate, that we properly understand the history and reasons behind the tax arrangements we have. The fuel excise system was first established in the 1920s, obviously to provide a regular revenue stream to fund new roads—many countries have this type of arrangement. In the 1950s, it was extended to diesel; previously, it was levied only on petrol mainly for road vehicles. In the 1950s, the arrangements were that the mining sector did not pay the tax. There was no rebate; it just was not levied on the mining sector. I believe it was collected at the retail fuel pump, which generally the mining sector would not use.

Later on those arrangements were changed, so that the excise applies to all sales of fuel, both petrol and diesel, but a rebate is provided to those industries which do not use our roads. The reason the mining sector was not levied the fuel excise is that the excise was established to fund roads and the mining sector, along with the agricultural sector, which also receives a rebate, do not often use established roads. They have their vehicles and they use the diesel for equipment off road, either on roads they build on their mine sites or farms or for equipment that does a lot of the digging and waste disposal. That is a perfectly reasonable public policy rationale. We are setting up a system to fund roads, so of course we would charge road users to fund those investments. The mining sector and farmers are not using those roads, so we do not charge them the tax.

There is also a more technical economic argument about why we do not impose taxes on business inputs. It is commonly recognised that a tax on inputs to business is a particularly distortionary one because it will change how businesses decide to allocate their capital, to employ labour and will cause inefficiency in the economy. It is why, for example, the GST is a value added tax. We do not charge it on all transactions that occur in our economy; it is only levied on the value added of each individual sector of the economy. That is how businesses get input tax credits.

If the Greens were being economically consistent here, they would also be saying that all of those input tax credits that exist through the GST system are also a subsidy to businesses because it is exactly the same system that we use for the fuel tax rebate. Businesses which buy particular products on which GST is levied get a rebate, an input tax credit, which they record on their business activity statement and then the GST they pay is reduced accordingly. That is exactly how the fuel tax rebate system works. It works because that is a more efficient tax to fund it on the value added that each sector produces, not on the business inputs because just taking the cream, taking the valued added, will not distort the decision making, will not make businesses make massively different decisions and therefore, by definition, inefficient decisions.

That is why we have the system and it is also why it is not a subsidy. It is not a subsidy; it is simply a reflection of the fact that miners do not use roads and, as a general rule across all our taxation arrangements, we do not tax inputs to business. That is why, as I said in the introduction to my remarks, the Australian Treasury, the pre-eminent economic agency of our public sector, do not define the fuel tax credit system as a subsidy. In a 2011 submission to the G20 Energy Experts Group, Treasury stated that:

Fuel tax credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by business off road or in heavy on-road vehicles.

That is pretty clear. Apparently Senator Waters mentioned there will be another Green senator contributing to the debate this morning. In good faith, if they are serious about this, rather than just running a political campaign to bash the mining industry again, would she please outline why the Greens disagree with Treasury and why their particular and expert evidence is wrong. I would also add that each year Treasury compile what is called a Tax Expenditures Statement, a summary of all the reductions in tax rates we provide to particular sectors and how much that costs the budget. In that document you will see the cost of things from the superannuation guarantee right through to forestry managed investment schemes, different arrangements the government has established to provide tax assistance or a tax credit to particular businesses through the economy. It is very important to note that, while that document is not per se about subsidies themselves, Treasury do not include the diesel fuel tax rebate as part of their assessment. They could easily do that. The Greens have had it costed by the Parliamentary Budget Office. It is not a difficult economic calculation, but Treasury do not do that because it is not a tax expenditure, it is not a reduction in tax; it is simply a historical reflection of the fact that we have not levied this tax on the mining sector or on the agricultural sector.

Likewise, the Productivity Commission compile a report each year specifically on assistance measures to business called the Trade and Assistance Review. Once again, consistent with Treasury practice, the Productivity Commission do not measure or estimate the fuel tax rebate as a subsidy. They have had ample opportunity to do so over many years. Indeed, I asked them about this at Senate estimates this year and they have made the judgment that this particular arrangement is not a subsidy. Therefore, the Greens are completely acting against all of the expert economic advice in defining it as such.

More generally in the Trade and Assistance Review that comes out every year the Productivity Commission measures the assistance given to different sectors of our economy across the board. It is very wide ranging and includes research and development funding; it includes the effective rate of assistance provided by tariffs—we used to have quotas, but we do not have them anymore; and it also covers other more general and specific business assistance provided to different industries.

I am sure the Greens have read this and I am sure they have heard this evidence before, but one thing they simply ignore and do not seek to rebut at all is that the Productivity Commission has concluded that, of all the sectors of our economy, the mining sector receives the least amount and the lowest rate of assistance from government. Remember that that assistance is very broad-ranging—it also includes generic R&D funding, and I will quote the exact figures in a second. Most of the mining sector's assistance is made up of that research and development funding that is available through R&D Start and through the R&D tax concessions that have been a longstanding arrangement and, of course, are available to all businesses—they are not specific to any particular sector of the economy.

The PC concluded—and I think it is important to read out exactly what they said—in their latest report that was released in June this year:

The effective rate of assistance — net assistance per unit of value added — was around 4 per cent for the manufacturing sector, nearly 3 per cent for the primary production sector and less than 1 per cent for mining. At the industry group level—

which is a more disaggregated level—

the highest measured effective rates of assistance continued to be for the Motor vehicles and parts and the Textiles, leather, clothing and footwear industry groups.

The Productivity Commission said in that quote that the assistance to the mining sector was less than one per cent—the actual effective rate for the mining sector is 0.1 of a per cent. That is 0.1 per cent of their value added—that is the rate of assistance that the mining sector received from the government. That is a figure you will never hear the Greens quote—0.1 of a per cent—just registerable in one-tenth of a per cent. The other sectors—the manufacturing sector with four per cent and the primary production with three per cent—receive multiple times greater assistance than the mining sector receives, but that is not what the Greens quote. They ignore that; I am not sure why. I wait to hear how the Productivity Commission has got this wrong. I believe they have been doing these reports for nearly 40 years, but apparently they have got it wrong for that whole period. I continue to wait for a Greens senator who is arguing for these particular policies—and they do that regularly—to engage in this debate and to properly rebut that expert evidence from those organisations.

In other debates in this context I have heard some Greens use an Australia Institute report that has been completely discredited. I noticed that Senator Waters did not quote from that this time, so at least she did not go that far. We have established, though, that the diesel fuel tax rebate is not a subsidy. But the Australia Institute compiled a report, I think some time last year, which purported to show that the mining sector receives $17.6 billion in subsidies. That was made up partly by the diesel fuel tax rebate which no-one, except for the Greens and their supporters, thinks is a subsidy. They also had some other things in this report that are even more absurd, so perhaps that is why Senator Waters did not mention it. I do not exactly know how the Australia Institute came to this, but in their $17.6 billion they included the costs of providing subsidised passenger rail travel in Queensland. Apparently that costs $1.05 billion a year in Queensland, and they included that in their $17.6 billion figure. They got lots of media and stories at the time this was released, saying, 'The mining sector is receiving $17.6 billion', and various media outlets reported it without any question.

Included in that figure was not just this diesel fuel tax rebate, which is a complete red herring as well, but also $1 billion from subsidising passenger rail services in Queensland. How does that relate to the mining sector? How could you seriously put forward that subsidising passenger rail services in Brisbane—because that is the only place that has passenger rail services in Queensland—gets a billion bucks, and that that is a subsidy to the mining sector? I do not know if the Australia Institute has been to any mines recently, but none of them is in Brisbane. They are all outside of Brisbane, and I do not think there are any TITO—train-in train-out—mining workers in this country. There are FIFO workers—fly-in fly-out—and there are DIDO workers—drive-in drive-out. I do not think there are any TITO—train-in train-out—workers; I do not think they exist. Again, perhaps the Greens have evidence of these mine workers who put on their 'don't kill me' vests in the morning, wait for their train at the Yeerongpilly station and then, at the end of it, pop off at the Caval Ridge mine near Moranbah, but I did not know that that service existed. Maybe that accounts for some of the billion dollars that was provided. But I have not heard of that before.

They also included in these estimates nearly another billion dollars—$831 million—to cover the costs of port services that various state governments own or provide, and some own rail services as well. These are a bit more connected to the mining sector because they are services that mines actually use—unlike passenger rail services, mines do use freight rail lines and they do use ports to export their coal. But they included the total costs of providing those services in these subsidies—this $831 million a year. I am sure that the Australia Institute, and Dr Richard Denniss, who is a very intelligent person, would realise that state governments actually charge the mining sector to use those services. They charge them a fee to use a rail line, and they certainly charge them a price to use a port. Indeed, they are charging them such a price at the port at the moment that it is seriously hurting the mines because they signed many take-or-pay contracts a few years ago, and that is causing them quite a bit of grief. But, nonetheless, the state government do very well out of those things.

If you were being serious, then, sure, include that $831 million, but on the other side of the ledger you would, of course, include the charges that the state governments apply to the mining sector to use those services. I am not sure exactly how it works, but generally all of these services are regulated by various state-based regulators like the Queensland Competition Authority in Queensland, and they calculate what the appropriate charge should be. They look at the costs of providing those services and they include a rate of return for the government. And I do not think they are doing all that badly. I am sure they are actually making money from the mining sector, so it is the opposite of a subsidy—they are making a return from it. Notwithstanding that, it was also included.

I should get off this topic because there are other things I want to say, but I will say one more thing on this Australia Institute report. There was one other element they included, a smaller element. Senator Nash would be very familiar with the Royalties for the Region program in Western Australia, a very proud policy initiative of the WA National Party. That is levied; it comes from royalties. Twenty five per cent of royalties in Western Australia are reserved for these regional programs.

The Australia Institute thought that that spending on the Royalties for the Region program was a subsidy to the mining sector. It was actually funded by a tax applied on the mining sector. They pay royalties, of course. But the institute did not include that tax in it; they included the payments for the Royalties for the Region funding as part of that $17.6 billion. For example, and I think Senator Nash would be interested to know, Ord Stage 2—which the Western Australian government is funding at the moment which is going towards expanding agricultural production—is apparently a subsidy on the mining sector. I do not quite see how that logic works. But, again, as part of that $17.6 billion, funding of an expanded agricultural irrigation project is apparently a subsidy to the mining sector. That is amazing logic on behalf of the Australia Institute, and the Greens have quoted that figure up hill and down dale, and it is completely discredited.

What is not discredited is that the most subsidised sector in our economy is renewable energy. It gets enormous amounts of subsidy. In August this year, a Principal Economics study found that in 2013-14 the renewable energy sector received subsidies of around $2.8 billion—these are actual subsidies, things like the renewable energy target, which pushes up power prices for poor people to pay for solar panels on the roofs of rich people; feed-in tariffs, which do exactly the same thing; and other green subsidies that we make to the renewable energy sector. While $2.8 billion is a lot of money, it is even much, much greater when you take it in the context of what the renewable energy sector actually produces, which is only a small amount of our power needs.

On that basis, on a megawatt per hour basis, the solar sector receives a $412 subsidy; the wind sector $42; other renewable sources $18. I think it is important to compare that with the coal fired sector, which receives less than $1 per megawatt hour and natural gas receives less than 1c per megawatt hour delivered. The subsidies to solar are almost 500 times that of mining and about 48 times higher than wind. But we are here debating a bill seeking to remove a nonexistent subsidy to the mining sector while completely ignoring the billions of dollars of subsidies that go to renewable energy. It shows the hypocrisy of the Greens, their lack of engagement in the real policy debate, and this bill should be voted against in this parliament.

11:10 am

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

Let me begin by thanking the Greens for bringing forward this private member's bill, the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014. I think it is a worthy debate for this chamber to be having. Whenever there is an amount as large as $5.1 billion in credits, it is worthy that, from time to time, that is justified and that we have this kind of debate in this place. It is also worth acknowledging the role of former Senator Christine Milne, who actually first introduced this private member's bill. Former Senator Milne was very passionate about these issues and had very strong views about these issues. While they were not issues that I necessarily always agreed, I came at them from a very genuine place. She is currently in Paris and no doubt she is watching this debate, because she cannot possibly get enough of this place!

I will not be supporting this Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014 and the Labor Party will not be supporting this bill, unless they are going to surprise me and all vote differently to the way I am going to vote. It is worthy for us to ask questions when there is an amount as large $5.1 billion in credits. We believe this is a worthwhile pursuit and a worthwhile credit to have in place. Senator Waters gave a passionate and detailed speech, and she outlined her case quite well. But I do not think Senator Waters would disagree that she does not come at this from an industry-blind perspective. Her views are shaped by the impact that she believes the fossil fuel industry is having—something which I agree with. Nonetheless, she is not looking at the issue as to whether this is a worthwhile credit in itself; she is looking at the industry as a whole.

There is no doubt that Senator Waters and others come at this from the viewpoint of wanting to see as much damage as possible done to certain sections of the industry. It shapes their views. Just as we say in the education space, which I am now in on a policy level, that the debate has to be sector blind; this debate about whether this is a worthwhile credit has to be industry blind. We have to be careful that sometimes the arguments that are being used for removing this are being used by Greens and others to argue the exact opposite on other industries, be it manufacturing or other industries. I think a little consistency here is needed.

Let us be clear here—and I think Senator Canavan outlined this more eloquently than I will be able to—there are no fossil fuel subsidies in our tax system. The fuel tax credit scheme was originally intended as a road-user charge. It pays for our roads and it pays for their maintenance. The excise on petrol and diesel is a tax on business inputs as well as on final use by households. Businesses that are using petrol and diesel as inputs into their production processes pay an excise of 38.143c per litre. Under the fuel tax credit scheme, eligible businesses can claim a rebate in full or part of the excise they have paid.

In 2010-11, the value of these credits amounted to $5.1 billion, which is a very, very significant amount. Again, that is why I think this is a worthwhile debate to be having in this chamber. The main recipients were—and these are the 2010-11 figures, the best set of figures available to me—the mining industry at just over $2 billion; transport, postal services and warehousing at just under $1 billion, at $998 million; and agriculture, forestry and fishing at $646 million. And the theory goes that taxes on intermediate goods—that is, goods used to produce other goods—can reduce productive output and, ultimately, living standards.

The diesel fuel rebate has the effect of preventing the taxation of a 'business input', and what I mean by that is the cost of fuel as a business cost, which is an accepted principle of good taxation policy. Public finance theory says that taxes should not be imposed on these intermediate goods, as it would distort the allocation of resources. Thus, reducing taxes on intermediate goods reduces distortion and increases output. The fuel tax credit scheme is designed to relieve industries of the excise that they pay on the petrol and diesel they use. As Treasury itself notes:

Fuel Tax Credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by businesses off road or in heavy on road vehicles.

The Productivity Commission prepares a Trade and Assistance Review every single year. These reviews identify and, where possible, quantify government assistance to different industries. The reviews do not include the rebates paid under the fuel tax credit scheme as a form of assistance. The easiest and most efficient way to administer that charge is to tax all fuel and then rebate those using the fuel for off-road or private use. A road user charge should not apply to a diesel-powered ship or boat conducting environmental surveys off the Great Barrier Reef. If the government were to keep these tax receipts, it would become a tax on business input. Business input taxes are widely known, recognised and seen as poor tax policy. The diesel fuel rebate applies to all businesses.

There is no preferential treatment for the resources industry in our tax system, but it is worth noting that they are the largest beneficiary of a program that is available to everyone. If we are going to find the resources of the future that we need to support and grow our economy, we need the best technology driving the exploration processes. Most exploration—let's be clear here—actually finds nothing. It is difficult. It is a risky kind of business to be in but, once a resource is found and the work is done, all expenses have been made and an efficient tax treatment makes sense. Significantly, neither the Treasury nor the Productivity Commission consider the rebate to be a form of industry assistance.

Unjustifiably taxing business inputs is inefficient, distorts investment decisions, distorts Australia's export competitiveness and creates uncertainty for Australian businesses large and small. What worries me is that I suspect that, to a certain extent, those who are proposing this bill have no issue with that and would actually like a system that would distort investment decisions away from the resource industries and the resource sector. I do not agree with that. I do not support that. I do not think that is the way we should be tackling this and the challenges of this.

I note that Senator Canavan went on earlier about the subsidies that are given in the renewable sector and the environmental space. I believe that, if government wants to be encouraging certain types of business activities, giving that kind of assistance and support to industries that government wants to promote and help is the right way of doing it. I do not think unfairly creating this kind of treatment of business inputs simply because this happens to be an input that is used more by the mining industry than by other industries is a sensible or efficient way of doing this. I just want to stress this, because I think there has been a bit of distortion in some of the facts that have been presented. There is no fuel subsidy. This is not a fuel subsidy. The fuel tax credit scheme was originally intended as a road user charge, and it was used to pay for roads and the upkeep of roads.

So Labor will not be supporting this bill. Labor has a proud record of striking the right balance between ensuring and supporting a growing resources industry and making sure that we obtain a fair price for the mineral resources that we own as Australians and that there is not a free ride or an unfair system in place to favour some of these mining companies. Labor recognises that the resources sector is an important contributor to Australia's economic growth. The Australian investment pipeline overseen by a Labor government was the largest that any country in the world has ever seen. While there are people like me who have been very critical of how some mining companies and LNG companies have behaved in terms of their tax paid and how they have structured their companies, be it through Singapore trading hubs or through internal loan arrangements, to minimise their tax liabilities, none of that should discount the importance of the industry to our economy. Direct employment in resource operations is over 250,000 Australians, over double the 136,000 that were employed in the resources sector when Labor came to government in 2007. When Labor left government, there was a pipeline of an estimated $268 billion of committed capital investment in around 73 committed resources and infrastructure projects.

There are challenges in this sector. I think we have to be quite clear and serious. We have to make sure things like the tax treatments in this area are correct. I believe we have a sector that will take advantage of opportunities if they are provided and will try to minimise their own tax liabilities and what they pay, and they have demonstrated that they will do that. That having been said, however, this particular case is not an example of where that problem occurs. The rationale behind this is that business inputs should not be taxed and the fuel excise and road user charge should not be applied to private road user. This is not a policy that is about the mining industry. It was never about the mining industry. It is about improving roads and providing the funds for improving roads. Because the end user is the one paying for a business input cost, it would make poor taxation policy—and in fact, in some cases, double taxation—to pursue that path.

I note that there are other speakers that want to get to the debate today, so I am not going to drag on for longer than necessary. I will make sure there is sufficient time, because I note that Senator Di Natale wants to get a speech in as well.

I do want to just very quickly say that the policy here needs to be divorced from the ideology. The ideology being proposed by some is that the mining industry is a bad industry, that it is a dirty industry and that we should do whatever we can to make it as difficult or as unprofitable as possible for those in that sector. I do not support that. I think that is conflating two very, very different issues. This is a specific piece of legislation that has been proposed about a specific tax credit, and it would be unfair and wrong to be treating it differently simply because it relates to a sector that some people in this chamber do not support. That is the wrong way of handling it.

That being said, this is a worthy debate to have. I thank Senator Waters for pursuing this private senator's bill, and again I acknowledge the incredible work that Senator Milne did on that.

In conclusion, in a final act of completely unparliamentary behaviour, can I just say a very big happy birthday to Sarah Coward, from my office. Thank you.

11:23 am

Photo of Richard Di NataleRichard Di Natale (Victoria, Australian Greens) Share this | | Hansard source

I rise today to speak in support of the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014. Just to be clear about what the bill does: it removes the fuel tax credit for resource companies which gives them effectively 39c a litre off their fuel. So, while the rest of us pay 39c in fuel excise when we go to fill up our cars, the large resource companies get a 39c discount. The bill also scraps accelerated depreciation. Let us not forget that this is not simply about the question of the fuel tax credit; it is also about other benefits given to the mining industry: accelerated depreciation for fossil fuel infrastructure and the immediate deductions that are available for mining exploration. It is a suite of measures.

We can have a long debate about whether this is a subsidy, a tax concession, a handout or a business input. We can have a long debate about that. There are many economists who describe this as a subsidy. There are others who would call it a business input and do not like the fuel tax credit being called a subsidy. We can get into that long argument about what it is, but we know what its effect is. Its effect is very simple. It means that, if you are in a mining operation, you get a big discount on the fuel that you use within that operation. Some people, of course, argue that the excise exists for road use and exclusively for road use. That argument is a straw man. Mining companies can claim fuel tax credits right across their operations, including those operations' heavy trucks and road freight vehicles that do use roads.

I think Senator Canavan said that it is not economically efficient to charge taxes on business inputs. There would be pizza delivery drivers and taxidrivers right around the country who would argue, 'Well, why are we being treated separately from the mining industry?' So let us be clear. It is a specific concession given to the mining industry. It is absolutely a concession, and it is a concession that is worth a staggering $3 billion to $4 billion a year, which goes into the pockets of some of Australia's most profitable companies. So, while we can get into a semantic argument around whether we call it a subsidy or a concession, the bottom line is that this is $3 billion or $4 billion that is going to the mining industry and that other industries do not benefit from. Let us be absolutely clear about that.

I would also like to suggest to Senator Canavan—he had a long treatise on economic theory—that the biggest subsidy that is available to the mining industry is the externalities they create that permeate the economy. They get a free ride on the back of those externalities. When you look at it, this is a very simple, straightforward proposition. This is where I think there is a bit of cognitive dissonance within the coalition. We get these long economic arguments about why the mining industry should not have to pay this $3 billion to $4 billion concession but not a word about the enormous externalities that permeate right through the Australian economy as a result of the activities of that industry.

If you are being consistent and you accept the science of climate change—and here is where we get to a point. I accept that some of the dinosaurs in the coalition do not accept the science. Now, I do not argue with them on that basis. It is the same thing as having an argument with someone who believes in chemtrails or some of the antivaxxers or about whether the moon landing happened or did not happen. There is no point in engaging in an argument around whether climate change is real or not. You either accept the science or do not. You either make your decisions based on the views of science or make them on some other basis that I think does not belong in this place.

If you accept the science of climate change and if you accept the evidence that is now almost unequivocal that, as a result of climate change, we are creating enormous problems right across the planet that are environmental, social and economic, then you have to be consistent with your own theory and acknowledge that the best and most efficient way of tackling those externalities is to price them so that businesses do not get a free ride. Effectively, we have businesses creating pollution which are getting a free ride on the back of the rest of us. That is where all of the bluster in the world comes unstuck because you are not prepared to be consistent with your own arguments.

Let us look at when the carbon price was introduced. The carbon price was introduced, and we finally did something about that enormous concession that exists with regard to cheap fuel. We had miners for the first time having to pay 6c—not the 39c that everybody else pays but 6c—in excise that reflects the carbon emitted in their fuel. When the carbon price was scrapped, that was $1.6 billion of revenue given straight back to the miners. It was an externality that finally was being priced, and any market economist worth their salt acknowledges that it is the most effective way to deal with the issue of carbon pollution—Senator Canavan is reluctant to go into that territory because that is a very slippery slope for the Nationals—and any economist worth their salt acknowledges we should ensure we are pricing these externalities. We finally did it. We had a 6c per litre price on fuel, and this government scrapped it, handing $1.6 billion back to the mining industry. It is an issue that is not being discussed much in this place.

In addition to the 6c per litre concession, the government also gave $574 million back to the industry for them not having to pay for their fugitive emissions on mining sites—another enormous externality dealt with through a market-based mechanism and scrapped by the economically illiterate government that we have taking us back to the last century. And just think about this: we finally get some rationality into the debate and we finally have a small price on fuel, pricing an externality, bringing in $1.6 billion at the same time as they were scrapping that bit of legislation, and what did they do? They tried to claw back almost the same amount from those kids under 30 looking for work, stripping them of income support for six months. That is this government's prescription for managing climate change and looking after people—scrap a price on carbon and sock it to young people under 30 who find it hard to find work. In this government's world, a job seeker filling up at the petrol station on their way to a job interview would pay 39c a litre in fuel and Gina Rinehart would not pay a cent. When you look at the latest BRW rich list you have Gina Rinehart, one of Malcolm Turnbull's 'battlers', valued at $20 billion, now doing a $200 million deal with Caltex for her Roy Hill iron ore mine site worth 120 million litres of fuel. So that $200 million deal with Roy Hill iron ore provided 120 million litres of fuel, and as a result, if this bill was passed, we would get $45½ million for that agreement. But, no, this government thinks that money should be pocketed by Gina Rinehart. That is the same amount of funding that was cut from the ABC and SBS.

We have a big choice at the moment. We do have some structural budgetary challenges, there is no question about that, and we have a choice about how we raise revenue. We can look at fair measures like ending these huge tax concessions. We can look at ending the huge tax concessions that exist within the superannuation scheme and look at multinational tax avoiders, and there is a bill now before the parliament that would do that, but this coalition government looks like voting that down. We can look at ending negative gearing so that we do not have those distortions within the property market. Or we can do what this government proposes to do and keep all of those concessions that benefit some of the wealthiest countries and wealthiest individuals in the country or we can slug a great big GST on everybody—a tax that we know impacts most on those people who can least afford it.

But it is more than that. This is a debate about the economic direction of the country. These big concessions do not just cost us revenue, they also cost us huge opportunities. We have capital that is being attracted to the fossil fuel and mining sectors because of these huge tax breaks and to property through negative gearing and we get lazy investment. We get investors looking for a free ride when that investment could be used in much more productive places in the economy, and that is part of the reason we are in trouble right now. We have a one-dimensional economy that is over reliant on the mining industry as a result of the huge concessions that exist within that sector, causing investment to be diverted away from those other productive areas of the economy.

On Sunday, the Greens released what I think is a visionary, ambitious, forward-looking blueprint for how we can make that transition, a blueprint called Renew Australia. It is a plan to not only double our energy efficiency but to also increase the amount of energy that we generate. Under the plan we expect that energy use will grow by about 50 per cent by 2030, and part of that will be the enormous transformation that occurs within our transport sector. We will see the electrification of transport and we will see a move away from those vehicles that use fuels like petrol and diesel and so on to electric powered vehicles and machinery. So instead of subsidising those industries of the last century, why not look at providing support for those industries of this century? This could be through a combination of measures including increasing the renewable energy target and having a 90 per cent target for 2030 through direct auctions, through the RET, through direct investment and through an increase in household solar. All of those measures would allow us to make the transformation that we need.

But it is not just happening within the domestic sector. Earlier this year the Australian Renewable Energy Agency partnered with Rio Tinto to install solar hybrid for their zinc mine in Weipa in Far North Queensland, instead of using diesel generators. So we have a solar hybrid system helping the operations of a zinc mine in Weipa rather than diesel generators. That is a first for mining in this country. The fact is that that technology has to compete against that subsidised diesel fuel provided for those dirty generators. If miners paid excise on that fuel, then solar would absolutely be more cost-effective for greenfield mine sites. It is effectively a reverse carbon price. What you are doing at the moment is offering an incentive to those old, dirty ways of doing things, and it needs to be scrapped.

This bill does a number of things. When you look at the purpose of taxation and tax credits, what we are trying to do is discourage bad behaviour, encourage good behaviour and raise revenue to pay for the services that we all want and deserve. That is what this legislation does. It does all of those things. It helps to restore the government's budget position; it helps us to reduce our lazy reliance on fossil fuels; it helps us to create investment pathways in new industries—those industries that will take us forward; it helps to drive the rollout of cost-competitive clean technologies; and it supports new sunrise industries. That is what is needed. This century belongs to the nations that take advantage of those opportunities. Yes, it is true that Australia has benefited from a strong mining sector. That is absolutely true, but we now need to raise our gaze.

Our prosperity depends not on what lies beneath our feet but on those renewable energy resources in the sky—the sun and the wind—and on new and emerging technologies like geothermal and tidal. We have those competitive advantages; we are lucky. As Donald Horne said, we are the lucky country. We are lucky because we are blessed with those renewable energy resources. We can make that transition. The challenge now is up to us. Will we take advantage of the enormous opportunity that this transition brings? Will we renew Australia? Will we kick-start our economy? Will we help restore the government's budget position? Will we be able to pay for services like health care and schools? Will we do those things by tackling some of these unfair concessions or will we stick to the old ways? Will we stick with a regime that props up industries that have been hugely profitable at the cost of ensuring that we have a much more prosperous, innovative and forward-looking nation? That is the question before us today.

11:39 am

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

I am delighted to rise to speak to the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014 and to correct the record in a couple of areas. First of all with regard to the supposed diesel fuel rebate, let us all be very clear. Originally a road maintenance tax was put on petroleum, an excise supposedly to improve and maintain roads. Of course, as we know, over time governments used that as a cash cow and very little of that money eventually ended up in road maintenance. But that was its original purpose, at a time when diesel was not particularly used in the transport industry. It was mainly used—as you know, Mr Deputy President, from your background—in stationary industries. As diesel came to be used more for transport it became necessary to equalise the excise being charged on petroleum for diesel for road maintenance purposes—a logical thing to do and it continues to this day.

There obviously were purposes other than transport for which diesel was being used—and still is—such as, firstly, generation of electricity in remote areas; secondly, in farming where farm vehicles were not used on made roads; thirdly, in fishing, as fishing boats do not use much bitumen or require access to roads. The final purpose is mining. So let us be under no illusion. The reason there is a rebate on diesel for use off-road in mining, farming, fishing and stationary purposes such as power stations is because that diesel is not used on made roads and therefore does not cause deterioration of made roads.

Why the Greens political party wants to try to attack the very group of industries that have been underpinning this economy for the last few years is beyond me, and let me go to that point right now by quoting Australian Taxation Office figures. The single biggest taxpayer in Australia last year and prior to that was Rio Tinto, the mining company. Close behind was BHP Billiton. In fact, in the period from 2006-07 to 2013-14, the mining industry paid $117 billion in company taxes and royalties. The industry itself in the final year of that era paid $21 billion, and that was double the 2006-07 figure. Again I quote Australian Taxation Office figures when I say that if you take taxes and royalties paid to federal and state governments, the contribution exceeded 40c in the dollar. The effective tax rate was greater than 40 per cent, according to the Australian tax office. But needless to say that is not the only contribution to government taxes. We know that these mining companies exist in rural communities—for example, Kalgoorlie in the goldfields area, Mount Newman, Tom Price and all of those communities feeding into Karratha and Port Hedland. We need to consider the income taxes paid by people who work in the mining industry, the contributions to shire rates, the contributions that flow on from a sector—and again it is claimed that the mining industries in this country are very, very small employers. In fact, the direct employment to July last year—it may have tapered off now—was 245,000 people, almost a quarter of a million people directly employed, and that was an increase of some 20 per cent to 2014 from 2010. I would accept that those numbers have now dropped off to some extent.

Let me talk about the effect that the carbon tax and the ill-fated and poorly-constructed mining tax had on the exploration and mining industries in Australia. These are figures I can quote to the Senate. In 2011, two-thirds of all ASX listed exploration companies had undertaken their mining exploration activity in Australia. By 2012-13, two-thirds of ASX listed exploration companies were engaged in exploration activity away from Australia. In 2011, two-thirds of those companies were spending on exploration here and a year later two-thirds were spending exploration funds out of Australia. That was the effect of the crippling mining and carbon taxes on that industry.

It reminds me that, of all exploration drilling holes that are undertaken, less than one per cent ever get to yield a mineralisation that is commercially viable. So, if we are to do as has been suggested in this bill before us today, we will further cripple a critically important industry for Australia and especially for my home state of Western Australia, being the largest iron ore exporter. One port alone, Port Hedland, exports one million tonnes of iron ore a day—365 million tonnes a year—with a benefit to the economy. The fact is that Australia is the most efficient iron ore miner in the world. Our expertise is strongly sought after throughout Africa, where most of the African mining activity is controlled by Australian companies, and also, increasingly now, in Latin America. I have spoken of our involvement there previously. And further opportunities exist in Mexico.

We need to reflect on the value of the mining and the LNG industries to this country. In her speech, in August 2014, then Senator Christine Milne made reference to the need for funding in the university sector. I do not know whether Ms Milne visited Western Australian university campuses to any great extent, but the most significant contributors from the corporate sector to the Western Australian universities are the mining and the oil and gas companies—BHP Billiton, Fortescue, Rio Tinto. Chevron alone has invested some $53 million into universities and research institutes to help build local academic excellence and research capability. There is value coming from that sector. There are employment opportunities at the high level for university graduates which are flowing through to the skills development sector. Mr Deputy President Marshall, you and I have participated in Senate inquiries in the past demonstrating the value and the need in this particular sector. I say again that the sorts of issues put before us by the Greens in the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014 will have the opposite effect.

I spoke a few moments ago about exploration. I was delighted that, with the permission of the then shadow minister Ian Macfarlane, whilst he was releasing our policy in 2013 on the east coast, I was able to attend the Association of Mining and Exploration Companies Convention in Perth and talk about the Exploration Development Incentive, which is now up and running and encouraging the small-cap mining exploration companies and investors to get back into exploration, because what we are not spending on exploration today we will not be yielding in five, 10 or 15 years time. Senator Milne, in her contribution in August of last year, drew attention to the gas industry, along with coal and oil, and the fact that she regarded that they were receiving unfair tax treatment.

I want to spend a couple of minutes on the contribution of one company. I understand that, in this place today, a motion will be moved to try to denigrate the influence and contribution of the Chevron Corporation and its partners. In this case it is Gorgon, Shell and ExxonMobil, and others in the case of Wheatstone. I want to place on record some statistics independently verified by ACIL Allen Consulting on behalf of Chevron. The contribution of those two major projects totals almost US$100 billion. It is the biggest, single investment ever made anywhere in the world on gas projects. But, of course, to this moment there has been no tax paid on Gorgon and Wheatstone outputs for the very simple reason that they have not yet started producing.

Those two projects and others on the north-west coast of WA will contribute over $1 trillion to the GDP of Australia, nearly $32 billion a year, when those projects and others are in full operation. They will generate 150,000 full-time equivalent jobs in Australia—5,000 jobs a year. The projected revenue to the federal government over the life of the Gorgon and Wheatstone projects is estimated by ACIL Allen at $338 billion, directly in company taxes, and another $320 billion—nearly $700 billion—from income taxes and other taxes. Not only will those projects be providing export wealth, they will be providing the very necessary domestic gas as well.

It is beyond me why the Greens want to completely and utterly try to emasculate the wealth-generating capacities of this country. In the case of gas, as the United States of America has found, it has been the biggest contributor to them meeting their greenhouse gas obligations.

Debate interrupted.