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Tuesday, 22 November 2011
Page: 13399

Mr CROOK (O'Connor) (23:10): I have previously had the opportunity to speak about my opposition to this mining tax in this House, and I intend to reiterate my opposition to this tax and outline the particular issues of fairness, which have led me to propose amendments to this mining tax. I did not support the mining tax at the election. I do not support the mining tax now. And I will be voting against the mining tax when it comes before the floor of this parliament. I have consistently stated that I do not support a Commonwealth mining tax. I believe that Australia's natural resources are owned by the states and not the Commonwealth—and, as such, I believe that the current royalty regime is the best mechanism to ensure the community receives a fair share of the mining industry. A Commonwealth mining tax is yet another attempt by the Commonwealth government to erode the states' rights and states' royalties. I have consistently said that this tax is a tax on Western Australia, as many have stated in this place today.

Since the announcement of the Gillard tax deal there have been various requests for information on where the mining tax revenue will come from. The government refused to released this information until forced to release it under freedom of information. As discussed in the Senate committee report, this FOI information confirmed that this tax is a tax on Western Australia. The FOI information illustrated that the Prime Minister struck a mining tax deal under which it expected that more than 80 per cent of the revenue would come from iron ore in Western Australia over the forward estimates. The taxing of one specific state economy in this way is unfair and discriminatory. This mining tax is yet another impost on the state of Western Australia. It is part of a triple assault on WA by the federal government: mining tax, carbon tax and the unfair return of the GST revenue.

As well as my opposition to the federal mining tax generally, I have particular issues with the negotiation, design and application of this particular mining tax, referred to as the minerals resource rent tax. Firstly, it will harm Australian miners by damaging their international competitiveness; secondly, the MRRT was the result of a secretive negotiation between the now Prime Minister and the three biggest multinational, multiproject mining companies—BHP, Rio Tinto and Xstrata—to the exclusion of every other mining company in Australia; and, finally, it delivers disproportionate advantages to the three big miners, who negotiated the design of the tax, and delivers competitive disadvantages to smaller, emerging miners who were not privy to the negotiations.

I have consistently called for this mining tax to be scrapped. The current tax was designed behind closed doors with the big three mining heavyweights: BHP, Rio and Xstrata. I do not begrudge the big three—as many have—for the way they negotiated this tax. Any company would look after their own interests when given the opportunity to negotiate a tax with a government. But these three companies are not representative of the mining industry. These three companies are multinationals with numerous projects which post tens of billions in profits each year. These three mining companies are very different to the 320 smaller mining companies who were excluded from negotiations completely. These companies compete in the same global markets as the big three.

Also excluded from the secret negotiations were the state and territory governments, including the governments of Western Australia and Queensland, where most of the mining industry operates. The secrecy that surrounded the negotiations has also extended to the assumptions, modelling and figures used by the government to underpin their forward estimates. Compare this to the Western Australian government, for example, which publicly provides assumptions underpinning royalties and forward estimates in their budget. Over the months I have lobbied the government hard to listen to industry, listen to the people and scrap the tax. However, if the government insists on this bad tax, it must at least make changes to ensure that it is fairer for the mining companies excluded from the negotiations.

I have opposed the mining tax passionately because my electorate of O'Connor is the home of many mining companies, and many of the companies' employees. These companies employ, train and upskill many of my constituents. Further, these mining companies, more than any other industry, continually make valuable and voluntary contributions to the community through provisions of infrastructure, funding for charitable projects and sponsorship. For example, a natural resource company operating in the port of Esperance, in my electorate of O'Connor, recently constructed the town's first overpass. This was a major infrastructure project that will continue to provide benefits to the town for many years to come. More than $4 million was spent on local goods, services and contractors during the construction of the bridge.

However, you do not need to live in or represent an electorate such as O'Connor to be outraged by the grossly unfair way this tax was negotiated and finalised, and you do not need to live in an electorate such as O'Connor to feel uncomfortable about the way this tax is set to unfairly advantage the three biggest and most profitable mining companies at the expense of the rest of the mining industry. In this House I have previously expressed my dismay at the Labor government. It is a government that holds out values of fairness and equity, yet it devised and plans to impose a tax that advantages the three richest, largest and most powerful mining companies at the expense of all smaller mining companies in Australia. I am appalled that a Prime Minister would trade off the interests of the unrepresented mining industry to help seal her own leadership deal. It has been my position that if the federal government insists on a mining tax, it should start fresh negotiations in good faith for a fairer mining tax. If the legislation is going to be forced through this parliament, and I truly hope it is not, it is my position that the legislation should at least be fair.

Unlike the government, I have spent considerable time consulting industry on issues related to the mining tax. Following these lengthy consultations, I have decided to move three amendments to make the tax fairer. Firstly, I will be moving amendments to introduce a 10 million tonne ore threshold so that smaller miners who sell less than this threshold amount of ore will not be liable for the mining tax at all. Secondly, I will be moving an amendment seeking a legislative commitment that the smaller miners will not pay the tax earlier or at a higher rate than the three mature minors who negotiated the tax. Finally, I will be moving an amendment to exclude magnetite ore from the tax. Magnetite ore is significantly different to hematite ore, and, because of these differences, it should not have been included in the mining tax to begin with. These amendments will not fix the mining tax; however, they would at least make the tax fairer for smaller mining companies as compared to the big three mining companies.

I will now go into these proposed amendments in slightly more detail. The first proposed amendment would introduce a 10 million tonne per annum ore threshold. The effect of this amendment would be that the smaller companies who are under this threshold will not pay the MRRT. This would occur through the introduction of an emerging miner factor which would discount the MRRT rate by 75 per cent. The emerging miner factor, in addition to the existing extraction factor of 25 per cent, would reduce the MRRT rate to nil. The dozens of emerging miners who have profits not comparable to the $20 billion posted by BHP and who were completely excluded from negotiations and consistently excluded from any meaningful consultation should be excluded from the operation of this tax. They should not be subject to the complicated compliance burdens of this tax, they should not be subject to the disproportionate effects it has on emerging miners and they should not be burdened by the weight of a tax designed by the richest and most powerful members of the industry.

If some of the miners excluded from negotiations are forced to pay the tax, there should be a much higher threshold before the liability kicks in. A tax negotiated by a company posting a $20 billion profit and hoping to extract over 300 million tonnes of iron ore in the future should not apply to a company which is making one-thirtieth of the profit and extracting less than one-thirtieth of the ore and which was totally excluded from all negotiations. If the government insists on this mining tax, at the very least a higher threshold should be introduced to properly distinguish between the huge multinationals who negotiated the tax and other, emerging and junior, miners.

Modelling and studies conducted by industry and academic institutions have indicated that the application of the MRRT will lead to the smaller miners paying the MRRT earlier and at a higher rate than will the big three miners who negotiated the tax. This competitive disadvantage was confirmed in a study conducted by a professor of economics at the University of Western Australia. The differential is partly due to the starting base allowance. I do acknowledge that the starting base concept gives recognition to the risk and substantial capital expenditure undertaken up to the proposed taxing point. However, the MRRT must be imposed fairly, and as a question of fairness it is imperative that we ensure that the social consequences of the tax are not unfair to small miners. We must ensure that small miners, perhaps with single projects, do not have cost disadvantages compared with the big miners who have multiple projects. After all, they are all selling their product in the same global market.

As such, I will propose amendments to guarantee that smaller miners will not pay the tax earlier or at a higher rate than the three mature miners. I propose that this be done by inserting a clause in the MRRT bill that ensures that no miner pays before a mature miner pays the MRRT. A mature miner is then defined as a miner with a group production of over 40 million tonnes, to capture the three large miners in the industry. This will distinguish fairly between the massive established miners and the rest of the industry.

Secondly, a clause in the imposition bill will ensure that no miner's MRRT rate is higher than the highest mature miner's rate. If the government insists on continuing with this flawed tax they should enshrine in legislation that small miners will not pay the MRRT earlier or at a higher rate than the bigger multiproject miners.

The other issue which should be addressed is the exclusion of magnetite from the mining tax. Magnetite ore, unlike hematite ore, has a very low iron content and is therefore of very little value in its raw state. Magnetite companies have to heavily process their ore before it is valuable. The government has said that it expects to recover no tax from magnetite miners under the mining tax because the value of the ore relies on significant downstream processing. However, these companies continue to be burdened with compliance costs and plagued with investment uncertainty over the application of the mining tax. An amendment to exclude magnetite would mean greater investment certainty for a new value-adding industry that promises more than 12,000 new jobs in Western Australia alone.

The mining tax is an assault on Western Australia. It is yet another example of the Commonwealth eroding state revenue bases, and will result in another example of the Commonwealth ripping off regional Western Australia by failing to apply the revenue to WA and to regional Australia generally. The government rhetoric in the budget papers and the media is that they are investing in our mining regions. However, over 50 per cent of the first billion dollars from the mining tax revenue will be spent on upgrading roads, freeways and bridges around Perth airport under the Gateway WA project. The government falsely claims such projects as 'regional development'. In reality it is stripping profits from regionally based companies and misusing that revenue by pandering to marginal electorates and further supporting a fly-in fly-out workforce, which has a devastating effect on regional development in Western Australia.

This is why I will be supporting the member for Kennedy's amendment in ensuring that part of this revenue goes back to regional Australia. I urge the regional members of this House, especially those who have resource industries, to seriously consider the merits of the mining tax on regional development and regional Australia.

In conclusion, I would like to acknowledge my staff—particularly Kayla Calladine—who has done a mountain of work on this very important issue. I thank her sincerely. This mining tax is bad for industry, bad for Western Australia and bad for my electorate of O'Connor. Further, this particular MRRT is grossly unfair for the smaller and emerging miners and is grossly unfair for every mining company excluded from the Labor government's deal with the three big miners.