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Tuesday, 22 November 2011
Page: 13333


Mr GIBBONS (Bendigo) (18:25): I rise to speak on the Minerals Resource Rent Tax Bill 2011. The Minerals Resource Rent Tax is about Australia's future. It will help secure the future of all Australians, not just the future of a few mining companies and their wealthy owners. It will boost the retirement savings of about 8½ million workers. It will help low-income earners to boost their superannuation contributions. It will fund billions of dollars of new roads, bridges and other critical infrastructure. It will help 2.7 million small businesses to invest in new machinery and equipment. It will make a major contribution to this country's future, far beyond the current mining boom. And it will do this by ensuring that our largest mining companies pay a fair price for the mineral resources that are owned by all Australians.

No-one disputes the enormous benefit to the Australian economy and the thousands of jobs that mining creates. What is vigorously disputed, however, is whether the Australian taxpayer is getting a fair deal from the extraction and processing of mineral resources which are owned by the Australian people. The big exporting mining sector is now enjoying the benefits of a second commodities boom in little more than a decade. Since the current boom took off in 2004, we have seen prices for iron ore increase by more than 400 per cent and prices for black coal increase by more than 200 per cent. And while it is true that mining companies are taxed on their profits at the same nominal rate as all other companies, this does not entitle them to get the nation's natural resources on the cheap.

Entirely separate from company profit tax are the amounts paid by miners for the right to extract and sell our natural resources. These amounts represent the cost of raw materials for the mining companies, and they have been typically charged as royalties. The simple fact is that the amount mining companies are paying taxpayers for the 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; today that proportion has fallen to $1 out of every $7. So the case for the MRRT is quite simple. The nation is clearly not receiving anything like the same benefits from the current resources boom as the mining companies and their executives, and the MRRT will ensure that all Australians get a fairer share from our valuable non-renewable resources. In addition to the MRRT, the existing Petroleum Resource Rent Tax regime is to be extended to cover all oil, gas and coal-seam methane projects, onshore and offshore, to ensure that these projects are treated equitably.

As I said, iron ore and black coal prices have increased by several hundred per cent since 2004. Iron ore, coal, oil and gas are our biggest and most profitable commodities and represent three-quarters of the value of our resource exports and operating profits. That is why the MRRT will only apply to our very largest mining companies. In fact, the MRRT and PRRT combined will only be paid by some 320 companies. And, unlike royalties, one great advantage of the MRRT is that it varies depending on profits, so the higher the mining company's profit, the more tax is paid.

I said earlier that mining companies are taxed at the same company tax rate as all other companies. This is true, but there are billions of dollars of tax concessions that only mining companies enjoy, and which are, in effect, allowed to them by other Australian taxpayers. For example, other companies have to depreciate their capital equipment over its expected useful life, but mining companies can deduct the full cost of exploration immediately. And there is preferential treatment for oil and gas companies that effectively increases depreciation rates for assets like oil rigs. Concessions like these mean that the effective tax rate that mining companies actually pay on their profits is well below the headline rate of 30 per cent. And in some stages of a mining company's life, particularly when it is investing heavily in equipment and exploration, it might be many years before it pays any company tax at all.

In fact, the mining company owned by Mr Andrew Forrest has not paid any corporate tax for seven years.

Mr Forrest is Australia's richest man, worth an estimated $6 billion. He recently acquired a $50 million private jet, and his Fortescue Metals Group is valued at $16 billion. yet he has not paid one cent in company tax. He is a high-profile and vocal critic of the MRRT, yet he has admitted his company may not be liable to pay that tax either.

But wait, there's more. On top of concessions that allow billionaires to avoid company tax, there are the fuel tax credits—'fool tax credits' might be more appropriate! While working Australians pay about 38c a litre in excise when they fill up their tanks, the likes of BHP Billiton, Rio Tinto and Fortescue Metals get back nearly all of this through tax credits. In fact, the mining industry is the largest beneficiary of the fuel tax credit scheme, and Mr Forrest gets about $1.7 billion a year back from the taxpayer. So the reality is that the resources sector already gets very generous benefits from the Australian taxpayer when compared with other companies.

I want to turn now to how the revenue raised by the MRRT will benefit all Australians and how it represents a major investment by the Gillard government in this country's long-term future. The revenue from the tax will support all Australian businesses, particularly those that are not directly benefiting from the mining boom, through a cut to the corporate tax rate and additional tax relief for the nation's 2.7 million small businesses. It will also support the Regional Infrastructure Fund with billions of dollars to build roads, rail and other critical infrastructure.

Compulsory superannuation contributions for working Australians will be boosted to 12 per cent to ensure fairer and more secure retirement incomes. About 8.4 million employees are expected to benefit from this measure alone—that is 90 per cent of all full-time workers. Let me give you some examples of what this means. For an 18-year-old entering the workforce on average weekly earnings, these superannuation reforms will add $200,000 to his or her retirement income. Someone now aged 30 will have an extra $108,000 on retirement and someone now aged 40 will be $57,000 better off at retirement. Even someone who is now 50 will get $22,000 more at retirement and be even better off if they take advantage of the new tax break for additional super contributions by older workers.

Currently employers are only required to pay the superannuation guarantee until their employees reach the age of 70. So to allow older Australians to stay in work if they want to, people aged between 70 and 75 will now be included in the compulsory superannuation guarantee. Older Australians with low super balances will also get a boost to their retirement incomes. Workers aged over 50 with balances below $500,000 will be eligible for tax concessions on up to $50,000 worth of top-up funds. The government will also provide up to $500 to individuals with taxable incomes of up to $37,000 at a concessional rate of tax. This will help low-income earners, effectively eliminating the contributions tax they pay on their super.

For businesses, the superannuation guarantee rate will be increased gradually, with initial increments of a quarter of a per cent from 1 July 2013. There will be a phased increase over three years to 12 per cent to allow employers to take the increased contributions into account in future wage negotiations. Many employers will also benefit from company tax reductions. Future wage increases are expected to be sufficient to ensure that real wages continue to grow overall.

Small businesses in particular will benefit from the MRRT. Every small business in the country will get a tax break through instant write-offs for asset purchases of up to $5,000. Currently a small business has to depreciate a computer or a machine over three years. Now that business will be able to write off the asset in the first year, giving them a boost to their cash flow. Up to 2 4 million small businesses, including tradies, will benefit from the simplification of the depreciation rules for other assets, and up to 720,000 small companies will benefit from the reduction of the company tax rate from 30 per cent to 28 per cent from 2012-13, one year earlier than the start of the cut for larger businesses.

Reducing the current 30 per cent company tax rate will create new jobs, attract investment and grow the economy and is expected to boost long-run GDP by 0.4 per cent. Despite all of these economic benefits, the scaremongering from parts of the business lobby and the opposition is intensifying. A year ago we heard dire predictions that a mining tax would cripple our resources industry. However, since the announcement of the MRRT, the industry has continued to go from strength to strength: There has been a boom in investment, a boom in profits and a boom in employment. New investment in the sector has risen from $35 billion in 2009-10 to nearly $50 billion last year and is expected to be $82 billion this year. Australia's earnings from energy and minerals exports have gone from $138 billion in 2009-10 to $175 billion last year and an estimated $218 billion this year. Employment in the industry has risen 14 per cent in the past year. That is an extra 27,800 people now bringing home a pay packet each week.

Vested interests will always say whatever suits them so they can tear down important reforms, but the Gillard government is committed to the MRRT and to ensuring all Australians benefit from the big profits many of these mining companies are making. In contrast, those opposite have no plan to capture and distribute the benefits of the current mining boom. The coalition failed to harvest the benefits of the previous resources boom and, given half a chance, they would squander the current one as well. Instead of supporting the sensible measures in these bills, they are trying to wreck a vital reform for these uncertain economic times. Instead of profits based tax reform, which is supported by the mining industry and which taxes only the largest and most profitable companies, they continue to support the inefficient royalties system, which hits all companies—small and big, in bad times and good—regardless of how profitable they are. The evidence is now overwhelming and incontrovertible: the MRRT and PRRT have not, and will not, discourage investment in Australia.

I might just point out, too, that goldmining in the state of Victoria is exempt from royalties. I am wondering whether that will continue under the Baillieu government because goldmines in Victoria will not be affected by this MRRT tax but they may well be adversely affected if the Baillieu government decides to reintroduce royalties. The royalties system was abolished by the previous Brumby Labor government to attract jobs in the industry and it has done that very well.

The government, through extensive consultation with industry, has designed a tax that will ensure Australia remains internationally competitive. Claims by the member for Groom, for example, that the MRRT poses a sovereign risk to Australia are simply wrong and not supported by any evidence whatsoever. The fact is that last year saw record levels of capital investment in resources and energy projects, despite the industry having full knowledge of the details of the MRRT. New capital expenditure on minerals and energy projects in 2010-11 was the highest on record and nearly four times the average annual expenditure of the past 30 years. Since the government announced the MRRT and PRRT on 2 July last year, we have seen investment not only continue but accelerate, particularly in the three commodities—coal, iron ore and petroleum—covered by these resource taxation reforms.

Claims that the MRRT somehow disadvantages small miners are also wrong and have been rejected by the Minerals Council of Australia, among others. Despite what the jetsetting Andrew Forrest may claim, the vast majority of the MRRT will be paid by just three companies: BHP Billiton, Rio Tinto and Xstrata.

Those opposite need to stop saying no and support this important economic reform, instead of denying the nation the benefits of our biggest ever mining boom—benefits that include billions of dollars of new roads, bridges and other critical infrastructure, much of which will benefit the resource-producing regions of Western Australia, New South Wales and Queensland.

In summary, the Australian people, and not the mining companies, own the mineral resources in the ground. These resources can only be dug up and sold once, and that is why the Gillard government is committed to ensuring that all Australians benefit from our nation's mineral wealth. The MRRT meets all of the criteria for a good tax. It is economically efficient, it will raise revenue without distorting investment incentives for mining companies, it is fair, and Australia's big mining companies can certainly afford to pay it.

I commend these bills to the House.