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Wednesday, 10 September 2003
Page: 19646

Dr EMERSON (10:50 AM) —I support the amendments moved by the member for Kingston to the Taxation Laws Amendment Bill (No. 8) 2003. The whole purpose of a petroleum resource rent tax is to be able to obtain for the community a fair share of any rents that arise out of the exploration for and production of oil and other resources. One of the great virtues of this tax in its design and in its implementation has been its stability over time. It is very difficult for explorers and developers of resources to make decisions in the context of changing fiscal rules, especially if those fiscal rules change in adverse ways. That can certainly affect in a very bad way their decisions on whether to explore and whether to develop resources.

So the resource rent tax is designed to be stable over time, and it has been. There was one change in the late 1980s, which was sought by the major companies in Bass Strait. Ironically, it was the very change that we advocated when we were designing this resource rent tax back in 1984. At that time Esso and BHP had said it was not a good idea. They came back to us several years later and said it was a good idea. That is the one substantial change that we did make. It allowed for wider deductibility of exploration expenses and an adjustment to the threshold rate of return at which this tax would be triggered. That was a positive change because it took us back to the optimal design of this tax.

With that exception, there have not been any significant changes over the years. That is a virtue, because it has allowed explorers to plan their decisions in the context of a stable taxation regime. We now have proposals to make changes that can adversely affect the stability of this tax. The problem is that, once you start tinkering with taxes, you get all sorts of arguments from all sides. On one side are the explorers and developers and on another side are people who say, on behalf of the community, that maybe we should be taxing more. I am not advocating that. But, once you open the box up and say that stability is no longer a virtue for a tax regime, you enter into an era of instability and I think that is bad. The purpose of all of this is to emphasise that any changes to the petroleum resource rent tax would need to be very worthy changes and there would need to be a compelling reason for them. In this case, the reason is not compelling. I therefore support the member for Kingston in his arguments that this should be the subject of discussion amongst open-minded people and that it should not be pushed through the Senate.

I cannot believe that the Treasury with which I dealt would ever have supported this regime change or these new measures. I hope and trust that the current Treasury would not support these arrangements. But they are the servants of the government of the day and I suspect that the government of the day has said, `We want to do this because we want to keep our friendship with the industry.' I can understand that in political terms, but at what cost? The answer to that is completely unknown. The revenue implications of this change could be profound. It would certainly involve tens of millions of dollars. I do not know whether the member for Kingston has a feel for whether it could be hundreds of millions of dollars, but it would certainly be tens of millions of dollars.

Treasury is not in a position to provide any costing, so we are supposed to endorse and pass legislation which has an unquantified cost to revenue and which, in my view, subject to further argument and consideration in an open-minded way, changes the tax regime for the worse. By allowing this particular treatment of infrastructure, you are in a sense polluting the tax. You are mixing up a rent tax with a company tax in undesirable ways. I do not see that the case has been made. Let us have the discussion, but let us not just jam this through the Senate when Treasury is not even in a position to advise whether the revenue impacts of this are small, medium or large. To close, I have to say that, when the government says it does not have enough money for education or health, it seems to me to be preposterous that it says it will nevertheless pass an open-ended arrangement, the revenue implications of which are unknown. For those reasons I strongly support the member for Kingston's amendments. (Time expired)