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Tuesday, 22 November 2011
Page: 13204

Mr OAKESHOTT (Lyne) (09:16): Australia has abundant non-renewable resources which are expected to continue to command high prices driven by demand, particularly from China and India. The community, through the Australian and state governments, owns rights to Australia's non-renewable resources and should seek an appropriate return from allowing private firms to exploit these resources. Current charging arrangements fail to collect a sufficient return for the community because the arrangements are unresponsive to profits. Further, the current arrangements distort investment and production decisions, thereby lowering the community's return from its resources.

The current arrangements should be replaced with a uniform, rent based resource tax using the allowance for corporate capital method. The tax should be imposed and administered by the Australian government. A rent based tax would over time earn a greater return for the community from the use of its resources while still attracting private investment. Such a tax would also require the government to accept a greater share of the risks than it currently bears.

To complement the resource rent tax a cash bidding system should be introduced to allocate exploration permits. Australian and state government fees and stamp duties on the transfer of interest in resource projects inhibit the efficient transfer of such interests and should, except for those related to administrative costs, be abolished. The Australian and state governments should negotiate an appropriate intergovernmental allocation of the revenues and risk from the resource rent tax. Those are not my words; they are the words of Ken Henry and the Henry tax review of 2009-10. At the time, I supported that recommendation and I continue to agree with it now.

The journey over the last couple of years of implementing the changes needed to develop the concept of the tax into practice has been an ugly one, to say the least. I pick up on the words of the former speaker: we have seen multimillion dollar advertising campaigns and political leadership change all wrapped up in a number of reforms but largely shaped around trying to turn this concept into a political reality. This week I hope we do. I hope this country now takes the recommendation of Ken Henry from 2008-09 and turns it into another step along the way to comprehensive tax reform for a better standard of living for all Australians over the next 40 to 50 years.

A number of considerations were involved in my conversations with government over the last month about the eight bills before the House, which I understand will be voted on tomorrow. The priority for me has been staying true to the comprehensive tax reform package of Henry and others and ensuring that government, at the same time as it introduces the resource rent tax and the efficiencies that go with it, does not give up the game on trying to engage the states in the parallel conversation and work of reducing and, where possible, eliminating bad state taxes. State based royalties are among those in question, and they are at the heart of Ken Henry's recommendations.

I am pleased that through the conversations with government we have seen some further work on state tax reform. As was released yesterday, we will see a referral to the Brumby-Greiner-Carter GST review to look at—and, hopefully, make strong recommendations on—the issue of how the states can be incentivised to participate in comprehensive tax reform for Australia rather than preserve existing blocks in the system, such as horizontal fiscal equalisation and the Commonwealth Grants Commission process and the agreements struck previously around GST distributions.

These work as disincentives to comprehensive tax reform and create an ugly and inefficient game between the Commonwealth and the states in which there is fake rage about states' rights when in reality what is being argued for is inefficiency in taxation for all Australians at the expense of efficiency of taxation for all Australians.

So I am pleased that that referral has been made. I look forward to some strong recommendations from former premiers of both political persuasions. I understand that John Brumby and Nick Greiner will be making their initial recommendations in February. I hope that as a consequence of that we will see the start of some real engagement between the two levels of government on comprehensive tax reform for a better standard of living for all of us. At the same time, when any new tax is being talked about, I, like many, look for the taxes that will be removed. In looking at the eight bills that will be voted on tomorrow, it would be remiss of all of us if we did not look in detail at what taxes will be removed and what benefits will be gained as a consequence of this tax.

The entrepreneurs tax offset will be increased—there will be a 600 per cent increase, from $1,000 to $6,500, in the instant asset write-off for small business. This will mean, I think, a substantial benefit for communities on the mid North Coast and, I am sure, for many communities around Australia. Also of interest is the removal of the low-income contributions tax for superannuation for anyone earning under $37,000 a year. That will add about $500 a year to the retirement savings of the people directly affected. If we are the welfare capitalist state that we claim to be, we will see that as necessary, fair, equitable and just tax reform for a better community for all.

Also, the superannuation guarantee generally will, over time, be lifted from nine to 12 per cent. In following the debate on the superannuation guarantee over a long period I have been in the camp of those who supported 15 per cent as the goal. I was persuaded on this position by those who say that, if we are serious about having a sustainable retirement savings structure for the future of Australia, given its demographics—the ageing bubble that is coming through—the figure of 15 per cent is the one that will deliver. I will be interested to hear from those who try to argue otherwise, either through the argument that it is too much of a load on the business community to go from nine to 15 per cent or the argument that the future model for Australia will be a continuation of a public pension scheme alongside a private retirement scheme based around superannuation contributions over a lifetime of work. But I do not think we have had that conversation in detail to date—the debate on the question of the future retirement savings we are trying to build in the face of the coming ageing bubble does not seem to have gone into much depth. I look forward to that debate happening in detail in this parliament alongside the present debate, which seems to be focused specifically on a mining tax and not much else.

I also welcome the one per cent reduction in company tax—it is small, but it is a start—as well as reductions that will, I understand, be introduced into the parliament sometime soon to create some further cuts in personal income tax. Both of those changes are welcome.

So it is wrong to just say that the mining tax is another tax on the top of many other taxes. There will be one in, but there will be more than one out—probably three or four taxes are going. There will be a lifting of the threshold for small business at the same time as an efficient resource rent tax is introduced as part of comprehensive tax reform which goes back to the Henry tax review.

I am in the camp which says that efficiency and a profits-based mechanism is good while inefficiency and a non-profits-based mechanism is bad. This is not a states-versus-Commonwealth argument; it is an argument about efficiency versus inefficiency. Therefore, I think this is a sensible move. This tax is the first of the substantial taxes in this parliament which I have supported. I did not support the flood levy. I thought existing consolidated revenue should be in place to deal with natural disasters in a country where natural disasters happen on a yearly basis, and I thought our existing tax base should reflect that. I do not think one-offs are the way to go. I did not—and still do not—support a carbon tax, even though the argument that I do seems to have entered the language of the mythology of the day. I support an emissions trading scheme and always have, alongside the Henry tax review recommendation to do exactly that. I do so based on science and economics.

So, of the substantial tax reforms that are coming down the line, this is the first one that I will be supporting. I will do so based on the fact that some work is being done at the same time to remove other taxes. I will do so on the grounds that this tax part of an exercise of comprehensive tax reform and of engaging the states in future reform throughout 2012.

It is very unlikely that I will support any amendment that would lessen either the base or the rate of the mining tax; I am in the camp that is in favour of broadening the base and increasing the rate. I think we will see that, over the next 10 or 20 years, governments of any political persuasion will see that the opportunity presented by this tax for profits-based, efficient taxation is the sensible way forward.

Over the next 10 to 20 years we will see at some point the Commonwealth and the states engage in sensible conversations—and a deal—on how to lessen bad state taxes and engage in a broadening of the use of more efficient taxes, and I think this is the start of the journey. Whilst I have not seen any of the amendments from any of my crossbench colleagues or anyone else in the building, I think it is unlikely that I will be supporting anything from the member for Denison or from the member of O'Connor, and I will have a good look at any measures that the member for Melbourne proposes in order to broaden the base of the tax.

I thank many people for their conversations with me through this journey. In particular I thank Twiggy Forrest, who is a bit of a whipping boy of the government—and especially of the Treasurer—at the moment. Even though I might not agree with his arguments of the day, I find him an engaging bloke and I do not think it is right for government to play the man and not the ball. Fundamentally, my position is based on the judgment call that I am accepting Treasury modelling over Twiggy modelling. That does not mean I do not like the man, and it does not mean I do not think he or his company is a contributor to Australian entrepreneurship and society. The government should keep the focus on policy rather than on individuals, and I think that the government has dropped the ball and started to play the man over the last month in trying to win the political argument about the mining tax. But within the bounds of terms of trade, exchange rates, the profits of companies and market-versus-historical considerations on the value of mining assets, I am willing to back Treasury modelling that the big three will be paying in the first three years. It is a judgment call, and I think it is going to be right. Therefore I think this tax is a sensible reform for a better tax system for the future. (Time expired)