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Tuesday, 22 November 2011
Page: 13212


Mr WYATT (Hasluck) (09:57): I rise today to speak on the Minerals Resource Rent Tax Bill 2011 and the associated legislation. The minerals resource rent tax is a project based tax on economic rents for mining companies who make profits from taxable resources, that is iron ore, coal and some gases. The tax is imposed on a mining company's mining profit less its MRRT allowances at a rate of 22.5 per cent. These bills were only introduced in the last sitting period and although they may have been in development since the Rudd government, there is no way we could possibly evaluate the possible impact of this tax on our own electorates and the small to medium sized businesses within them. Any uncertainty or lack of investment by the large mining companies will see many of these businesses suffer. They now compete against overseas contractors and companies to supply the mining sector and they do not need another albatross to be hung around the neck such as a resource tax that may have consequential flow-ons and unintended consequences.

It is interesting that in resource development, and certainly within my own state, there are tiers within the nexus of companies exploring and developing and creating the economic development but on the other hand creating supply demand that is raising prices exponentially in a way that makes it very challenging for locals. If you want to look at cost impost, look at service provision by state and territory governments whereby police, education and health sectors have to pay extraordinary rents for properties.

I agree with the minister when he says that minerals on the ground are for all Australians and this is a very worthy reason to looking at our national interest. So I wonder why the minister wants to implement this tax on companies when it will just result in them seeking cheaper input alternatives, even if this means going offshore. Governments must support small- to medium-sized businesses that are at the beck and call of mining companies.

There are many excellent local businesses in my electorate that contribute to the mining sector. I want to bring to the attention of the House several businesses that will be impacted upon by the mining tax in Hasluck. HV/LV is a switchboard manufacturer in Hazelmere. They are a local company with local staff and employ many apprentices. I have met with them several times and have always been impressed by their professionalism, the quality of their work and their competitiveness against international companies who make similar products. Even before the mining tax has been implemented, Steve De Mol was expressing his concern that his business has been losing tenders to cheaper offshore alternatives.

Dicko Harding from Orionstone, also in Hazelmere, has on several occasions expressed his concern about the introduction of this tax just when the economy seems to be picking itself back up after the global financial crisis. Pilbara Access Group, led by Stephen Easterbrook, has just moved its training operations into South Guildford. Pilbara Access Group is a high-quality scaffolding service for large mining sites. Their emphasis is on the provision of quality training and on an extremely high safety standard. They operate a number of training programs for apprentices and Aboriginal people. It would be a pity if they were to be affected by this tax and a disgrace if the government let this happen. Jeremy and Ian from Oztrac also expressed their concerns, as did those from WesTrak and Barminco.

Whilst I could talk about numerous other local businesses that would be affected, I only have limited time, which is disappointing because I care about these businesses and their workers. Hasluck has a large proportion of fly-in fly-out workers, commonly referred to as FIFOs. Many of these families rely on the one income, and any variation in this will see a number of families enter periods of hardship if employment opportunities are limited because companies make the decision not to expand their operations.

These families do not deserve to be treated with contempt by the Gillard government. They are making a living for themselves and looking after their families. We should support them as much as possible. I am concerned that this new tax will create job uncertainty and a potential loss of jobs offshore, and I will certainly fight for those families in Hasluck who rely on this important industry sector for their quality of life.

The Premier of Western Australia, Mr Barnett, has increased the royalty concession from iron ore and blown a $2 billion black hole in the Treasurer's budget. Again, the decision in New South Wales to increase royalties will put a $1 billion black hole in the budget. So we have the capacity for states and territories to continually look at the opportunities of resources within their respective states and territories and the contribution that they will derive from royalties that will provide the types of services that they are obligated to provide to their citizens. In Tasmania and South Australia, the respective state governments have also increased their royalties.

Every time a state or territory raises its royalties, this blows a massive hole in the Treasurer's budget. It is a long and slippery slope when a government declares war on states and territories. It is a state's constitutional right to determine how royalties are derived and used in their state. Mr Ken Henry confirmed that the Gillard government never sought advice on the constitutional validity of the mining tax. There has been no consultation with any of the state and territory governments about the implications of the mining tax for them.

This is an unfair tax, especially to Western Australia. My Western Australian colleagues and I will be advocating hard for the people of our great state. Royalties represent 20 per cent of WA state government revenue. This is extremely significant considering the infrastructure needs of the state—in particular, for infrastructure upgrades at the local level.

This incredible unfairness in distribution brings about the question of discrimination between states, presenting a potential constitutional crisis for the Gillard government. Already, the Western Australian government has signalled that they would pursue High Court action should the mining tax be passed. A sensible option to remedy this mess would be to sit down with state and territory governments. Let's not forget that Australia is premised on an agreement to unite in one indissoluble federal Commonwealth under the Crown and the Constitution, and the purpose, or the mechanism as I see it, of COAG is to enable Commonwealth and state and territory leadership to come together to establish and agree to a national approach—which, in this case, would be to pursue genuine tax reform by common agreement, not Commonwealth led. But, no, this government, which prefers not to consult and do things properly, sets that aside.

In the recent tax forum, the mining tax was off-limits, along with the carbon tax, which lacks logic. I would think it logical for tax forum participants to have had the opportunity to discuss the whole scope of taxes so that we could consider as a House those elements that would see genuine reform in taxation in this country. Two of the biggest taxes we have ever seen were off limits to a forum on tax reform in Australia. I find this inexcusable in our system of democracy. Instead, key negotiations were left to the government and the three biggest mining companies. This is incredibly divisive for the mining sector. All participants should have been included.

What has come from these secret negotiations? A tax which is only on iron ore and coal, another 287 pages of tax law which gives an unfair competitive advantage to the big three companies, who were allowed to design the tax. The Gillard-Greens alliance will create another industry for compliance officers and even more public sector workers to service this mess that divides the industry and takes nearly two-thirds of its revenue from just one state, Western Australia.

Who can forget the Treasurer on 10 May this year, during his budget speech, promising that the budget would be back in black by 2012-13? What we do know is that future revenue from the MRRT will be highly volatile and downward trending. Over the first year after the mining tax was announced, revenue estimates have jumped around, from $12 billion RSPT, to $24 billion RSPT with revised commodity price assumptions, to $10.5 billion post the Gillard mining tax deal and commodity price assumptions, to $7.4 billion post exchange rate changes, and then to $7.7 billion post further exchange rate changes. This indecision and guesswork is unacceptable at the smaller level that we have seen already from this bad government getting worse.

Now their modelling and predisposition for making mistakes will be applied to a gigantic new tax on a profitable sector of our industry and economy. It looks as if the government needs a miracle to get its budget back to surplus. This new tax will create that illusion in next year's budget but in the medium- to long-term the budget will be much worse off.

The Senate inquiry, which was chaired by my colleague and fellow Western Australian Senator Matthias Cormann, conservatively estimated that the net cost to the budget of the mining tax will be $20 billion—another quick fix by an incompetent government who cannot stop themselves from spending more and more of taxpayers' money.

This tax is punishing an industry which helped us through the global financial crisis. This is an industry which defines modern Australia and which so many of our people are involved with. We should be helping them rather than hitting them with a significant tax.

I listened to the minister in question time when he referred to a superannuation arrangement being derived out of the new tax. It was interesting to read in the Australian on Monday, 21 November 2011:

The Australian Chamber of Commerce and Industry has put that argument in perspective in its submission to the House of Representatives economics committee on superannuation. The boost to superannuation, the chamber points out, will be paid by employers through the superannuation guarantee levy, which will rise from 9 per cent to 12 per cent between 2013-14 and 2019-20. The chamber expects the Superannuation Levy Bill will ultimately cost employers about $20 billion a year.

The article goes on:

But employers fear that the 1 per cent cut in the corporate tax rate will fall well short of the costs of the higher superannuation levy.

The intent of the legislation is understood from what has been presented. Certainly, parliamentary colleagues on the other side who have spoken on this matter have raised what they see as the benefits, but one of the challenges we have when legislation is rushed in this chamber is that we do not get the opportunity to analyse its content and its consequential flow-on effects, nor to try to ascertain the risk management in terms of unintended consequences.

We are poised in a world global economy that is influenced by both the Eurodollar and the American debt. Should they waiver then our capacity to climb out of a global financial crisis is certainly likely to be limited. To that end, it is a pity that we are not looking at the opportunities to add value to the resources that come out of the ground.

I know we say that once we take resources out of the ground they are not replaced but I do not see that we are value-adding to those resources. I think there is also a need to consider the secondary industries which will add value to the resources that are there. I strongly oppose the Minerals Resource Rent Tax Bill 2011 and will stand up for the businesses and residents in my electorate of Hasluck. Considering the strength that the mining sector brings currently to many of the small businesses that exist within this nation, I would certainly welcome the opportunity of greater transparency in this legislation and consideration of those risk factors that might mitigate against the development of our economy. Let's hope that we do not look back and say that we had a great win from a government perspective only to find that we have limited the opportunity for our future generations.