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Tuesday, 22 November 2011
Page: 13207

Mr VAN MANEN (Forde) (09:31): It is with much sadness that I stand in this House while it debates another new tax, the latest in a line of taxes over the last four years that continue to erode confidence in the economy of this great nation. The tax, spend and borrow philosophy finds its latest incarnation in the 11 bills being debated here today. The mining tax is another bad tax from a desperate and directionless government whose only solution to the chasm of debt and deficit created by its prolific spending is to introduce new taxes or increase existing taxes. It reminds me of a song by our one and only Peter Allen. The title of the song, Everything that is old is new again, is very apt at present, and it appears to be the only jig that this government knows. As can be expected, this government has not put much thought into the introduction of this new tax at all. It is a tax hatched in secrecy. It is another tax from a government grasping at straws. It is just another of their optimistic attempts at a money grab rather than a comprehensive review of our Australian taxation system. They got it from the Henry report, yet they were prepared to implement only two or three out of the 130-odd recommendations in the report.

The minerals resource rent tax, coupled with the carbon tax, will make the mining industry in Australia one of the highest taxed mining industries in the world and make it more difficult for our mining companies to raise new capital and compete internationally. Our international competitors who compete with us to supply iron ore and coal to China are already on the record as saying that they will review their prices to seek to erode Australia's market share, yet our own government is still pursuing the proposal of introducing a new tax which will weaken our competitive advantage. This tax resulted from an agreement that at the end of the day was made by the Gillard government with only of three of the many players in the mining industry. There was no consultation with our smaller mining entities, and this lack of a consultative approach has angered many. The frantic rush to push through this new tax and patch gaping holes in the tax design is done only to ensure that it is well and truly pushed through before any future election.

This government constantly bungles many of the things that it introduces or tries to introduce, and this mining resource rent tax is no different. I think that probably we are up to version 3 at this point, after starting with the RSPT. James Gwartney and Richard Stroup, as outlined in their paper 'Transfers, Equality, and the Limits of Public Policy', make the following point:

The proposition that transfer policies promote the welfare of targeted groups is generally accepted. Taxes, transfers, and regulatory policies are perceived to be adjustment levers available to fine-tune the economic machine that grinds out goods and services. If we do not like the allocation of economic benefits, corrective action can be undertaken by moving the levers via the political process.

They point out that this is a naive view of the transfer society and add:

Taxpayers and transfer recipients are human beings—

or, in the case of our present discussion, companies—

not sheep who can be shorn at will, their wool automatically growing back for the next shearing season. People—

or companies—

will adjust their actions for individual advantage, in response to governmental changes in the rules of the game. Similarly, since the political process, like the market, results from individual choices, it may or may not yield its stated goals. Thus, it is not obvious that income transfers emanating from the political process will promote economic equality or even help the targeted groups.

As I noted earlier, this tax is a bad tax and, no matter its popularity, the MRRT is shockingly bad policy. It has come out of a deeply flawed process. There was no consultation with state or territory governments despite serious implications for their own source revenue. The government should negotiate with the states on federal-state financial relations to simplify the tax system, and the member for Lyne made a good point about that. But the government does not have the ticker or the fortitude to engage with the states to do the hard yards on genuine tax reform, so it has come up with various workarounds. The end result has been to make the system more complex and messy than it needs to be. The MRRT and the expanded PRRT have been negotiated exclusively with the three biggest miners—BHP, Rio Tinto and Xstrata—to the exclusion of all others. As Henry Ergas pointed out in his article in the Australian on 18 November:

... in terms of distribution of costs and benefits, the MRRT is like the carbon tax in reverse: the carbon tax imposes a hidden slug on the many to benefit a handful of Greens and a gaggle of their cronies; the MRRT taxes the few to finance highly visible giveaways to the many. For a government addicted to raising taxes, that is as good as it gets.

As Thomas Aquinas said, the 'argument from authority based on human reason is the weakest' form of argument, always liable to logical refutation—and the coalition vigorously refutes the need for an MRRT.

There are some long-term consequences which I do not believe have been discussed or touched on. We need to look at the negative effect that these new and increased taxes will have on company profits. The consequence of reduced company profits is that companies will have lower dividends, and a flow-on consequence of that is that they will have lower share prices. Whilst a component of the legislation is to increase super contributions over the next six or so years from nine per cent to 12 per cent, bringing a magic nirvana from this vast accrual of new superannuation benefits, what gets overlooked in this discussion is that a significant component of people's superannuation funds are invested in the very mining companies which are being penalised under the MRRT and the carbon tax and any of the other taxes the government has increased. The consequence of that will be lower profits and lower dividends and so less of a return to members' superannuation funds. It is another one of the government's wonderful pea-and-thimble tricks: they give with one hand and they take with the other.

Another consequence of the MRRT is that the risk premium for new projects has increased significantly, thereby reducing the attractiveness of these projects for the mining sector in general. It brings into question whether these riskier projects will now even be undertaken. In particular, it will have a significant detrimental effect on the smaller miners, as they generally depend on the riskier projects to a greater extent and are the ones prepared to take those risks. As Henry Ergas pointed out:

… the MRRT is a tax on precisely the kind of entrepreneurship that has underpinned Australia's high living standards: the entrepreneurship involved in pioneering new uses of our natural resources.

In his calculations, he estimates that for the higher risk projects the cost of this tax could be in the order of 70 per cent. What is the economic benefit or incentive to pursue these riskier projects when there is such a high tax consequence? Hugh Morgan, former president of the Business Council of Australia and former Western Mining boss, is reported to have said that the minerals resource rent tax is flawed and accused the government of 'pork-barrelling'. The government's so-called masterful magical model is, as I said earlier, just another of their pea-and-thimble tricks—nothing more than a confidence trick, giving with one hand and taking with the other.

The minerals resource rent tax remains a deeply flawed tax, no matter how many amendments are brought forward by members in this House, and it will have a detrimental effect on the resource sector. The resource sector is the primary driver of our economy at present, so, as the consequences flow through to the mining sector, the tax will affect other areas of our economy which benefit from what the mining sector brings to us at present.

In conclusion, I refer again to the paper 'Transfers, Equality and the Limits of Public Policy' in which James Gwartney and Richard Stroup stated:

The impact of transfers on economic equality and poverty is far more complex than most people realize. It is not obvious that the political process will yield egalitarian transfers. And, even when it does, the net egalitarian impact may well be quite modest. Since annual income is a highly imperfect measure of economic status …

We have seen that over many years in the mining industry, with the vagaries of international commodity prices. the consequence, Gwartney and Stroup said, is that 'some slippage can be expected'. Yet this does not appear to have been built into any of the modelling. They went on to say:

Predictably, market adjustments will erode some of the redistributive effects of egalitarian transfers. An expansion in transfers of any variety will encourage rent seeking and higher marginal taxes, both of which will retard aggregate output.

In a struggling global economy struggling, this is the last thing we need in this country.

The coalition opposes the mining tax and has done so since it was first unveiled by the former Prime Minister. And now, in this final week of parliament, we are onto version 3. The coalition will still oppose it because it is bad tax and it is bad policy. It is bad for jobs, it is bad for investment and it is bad for the future of this nation.