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Wednesday, 26 May 2010
Page: 4234


Mr GIBBONS (5:50 PM) —I am delighted to participate in this MPI debate on small business and the RSPT because I too have a background in a successful small business. The mining sector is now enjoying the benefits of a second commodities boom in little more than a decade. These benefits include generous tax breaks available for mining investment. Most, if not all, small businesses have to depreciate their capital equipment over its expected life, but mining companies can deduct the full costs of exploration immediately. While all companies and many small businesses pay company tax, these concessions mean that the effective tax rate that the government actually receives from the resource mining companies is well below the headline rate of 30 per cent.

Then there are the fuel tax credits. While small businesses and working Australians pay around 38c per litre in fuel excise, the likes of BHP Billiton and Rio Tinto get nearly all of this back through tax credits. In fact, the mining industry is the greatest beneficiary of the fuel tax credits scheme and gets about $1.7 billion back from the taxpayer.

But paying company tax like all other companies does not entitle mining companies to extract and sell the nation’s natural resources. Entirely separate from company tax is the amount that resource companies pay the nation for the right to extract and sell its natural resources. These royalties are the price at which the nation sells its resources to the mining companies. They are the mining companies’ costs of raw materials.

The amount they are paying the nation for those raw materials has not kept pace with the soaring prices at which they are selling them to China and other developing countries. In fact, a decade ago taxpayers received about $1 for every $3 of profit that mining companies made from selling our natural resources. Today that has fallen to $1 in $7. The dishonest scare campaign being waged by the Minerals Council of Australia and the big mining sector represents the greatest con job since the Fine Cotton ring-in scandal all those years ago.

I make a few points in response to the claims of these scaremongers. The combined figures for company tax and royalties that the mining lobby and the opposition are bandying around are meaningless. All companies, including small businesses which have a company structure in Australia, are required to pay company tax and very few receive such generous treatment as our resources and mining companies. These companies get a very good deal from taxpayers. The purpose of the RSPT is to ensure that all Australians, including small business Australians, receive fair value for the non-renewable resources that miners extract from our country. No other industry would have the nerve to argue that just because it pays company tax it should get its raw materials for free. In our current tax system, an ordinary Australian who earns an extra dollar through their hard work pays higher tax, but a mining company that earns massive amounts of profit pays the same flat, low rate of company tax. So I say to these Gordon Geckos of the Pilbara: the party is over and now is the time to face the hangover and learn to be good corporate citizens.

Let us look at some of the other wildly inaccurate claims that are being made. The first is that the RSPT will reduce investment. This is rubbish. Replacing an inefficient system such as the royalties system with an efficient tax such as the RSPT will drive future investment, growth and jobs, and that has to be good for small business. Secretary-General of the OECD Angel Gurria has said that Australia would remain an attractive destination for investment because ‘what drives investors is not necessarily that they are going to pay higher or lower tax’ but ‘the availability of raw materials’. The Commonwealth Bank has also produced some interesting analysis of the RSPT. The Commonwealth Bank’s analysis shows that the RSPT actually reduces the rate of return that a mining project needs for it to be a viable investment. This means that more mines will be able to get financing under the RSPT than under the current royalties schemes and that mining output will be higher under the RSPT at any commodity price level. This should be of great benefit to both the many prospective gold mining operations and the small businesses in my electorate. The Commonwealth Bank’s economists concluded that the RSPT ‘promotes growth and more productivity in economy by more equitable and efficient taxation of resources’. There are claims that the RSPT will harm existing projects. But, as the Treasurer has stated, mining companies will receive due recognition of their past investment costs and there will be generous transitional arrangements to the new system. There is also a scare campaign that the RSPT will cause consumer prices to rise.


The DEPUTY SPEAKER (Mr KJ Thomson)—Order! The time for discussion has concluded.