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Monday, 21 November 2011
Page: 13006

Mrs GRIGGS (Solomon) (19:44): I rise to speak against the Minerals Resource Rent Tax Bill 2011 and associated bills. As already stated by a number of my colleagues, the coalition is opposing the mining tax. The process from which this new minerals resource rent tax and the expanded petroleum resources rent tax evolved is deeply flawed and by no means broadly representative of key stakeholders. Industry and state and territory governments were all excluded from consultation. In fact, this bill arises from secretive and largely non-transparent meetings devoid of depth, balance and practices cognisant of responsible government. The Prime Minister and Treasurer, to be fair, did hold meetings with senior representatives from three big mining companies in Australia: Xstrata, BHP Billiton and Rio Tinto. This engagement amounts to representation of less than one per cent of the total players within the space.

The coalition believes rather than adding additional burdens to the mining sector there should be support for international competition. The coalition recognises that in a global economy the movement of capital to countries with the greatest rate of return is relatively easy. Buyers buying commodities have alternatives. From an Australian perspective, should we fail to recognise the wealth of mineral resources globally then we lack vision. Other countries have and are developing mining sectors that could well rival our own. Development within Asia's great economies makes clear the level of investment we are currently seeing within the sector. From a Northern Territory perspective, the impact of this tax is not significant in the short term, as commodities which the tax is based on—for example, iron ore and coal—are not significant activities in mining within the Northern Territory. However, with a potential for competitive disadvantage resulting from the introduction of this tax, future exploration and associated benefits to the Northern Territory will most certainly be impacted. I reiterate comments made by my colleagues earlier in this debate.

The Gillard-Greens government is no friend of the broad Australian mining sector. It is no friend of the broader populace of Australia and it is no friend of the Australian economy. As a nation we should be developing and playing to our strengths. It is no secret Australia is a world leader in mining, yet this Labor government wants to drag our vibrant mining sector down and damage the foundations of our economic vibrancy by introducing taxes that our competitors will not be paying. Such is the impact of the mining and resource sector the average Australian would more than likely confirm that it is certainly one of Australia's greatest assets. Indeed, they would probably say that this sector is one of our biggest strengths. This being the case, why is it that this Labor government fails to see and acknowledge the significance of the Australian mining and resources sector as one of Australia's greatest strengths? Instead, the Labor-Greens government has sought to impose two new taxes on this booming sector.

Firstly, we had the carbon tax, about which prior to the election the Prime Minister said, 'There will be no carbon tax under a government I lead.' Fourteen or so months on, we all witnessed Australia's betrayal. Despite the promise and despite deep community resistance, Australia now has a carbon tax. Secondly, we have the mining tax, which is not disparate to the carbon tax legislation. It is evident that this legislation has been rushed. It is reckless in its lack of transparency and is easily the worst piece of policy ever put forward by this government since the original mooting of the resource superprofits tax. There is no doubt in my mind this mining tax is a tax grab, pure and simple.

The Australian credit card has been maxed out by this government. We are on borrowed time. In an attempt to make the minimum payments, the government is looking at ways to get some quick and easy money. What happened to the huge surplus, Australia's Future Fund, left in place by the Howard government? It was squandered. We all know that this Labor-Greens government spent that surplus and much more. This mining tax will do nothing for investment. In fact, this tax will—to use a mining aphorism—undermine the resources cash cow and discourage investment. As many of my colleagues have pointed out, this is a tax that targets mid-tier miners. It is a highly discriminatory tax. The general view is that this tax is another bungled policy proposal by this incompetent government. It further demonstrates the core philosophy of this government: spend, spend, spend; borrow, borrow, borrow; and tax, tax, tax. That is what this government stands for: spend, tax, spend, borrow, then tax again, spend some more, borrow, spend and tax. There is no doubt that the biggest flaw in the mining tax results from its hasty inception—all without consideration as to the economic and potential sovereign risk to Australia.

As I stated earlier, the involvement of the bigger mining companies BHP Billiton, RIO Tinto and Xstrata as the only consultation within the mining sector in developing this tax is not representative of the broader sector. It can be perceived that this limited consultation facilitates a push by the big three for their advantage—an advantage not representative of the small-to-medium miners. It is these miners who have been completely ignored.

The shadow minister for energy and resources has already advised this House that, despite more than a year passing since the first resources tax was proposed, the wider industry is still facing uncertainty and the threat of being disadvantaged relative to our international competitors. Uncertainty and disadvantage are unacceptable impacts for Australia's sovereign risk profile and our international competitiveness. It is concerning that the big three miners have manoeuvred to gain benefits for themselves that smaller miners do not have access to. For example, the introduction of a market valuation system to calculate applicable deductions provides a significant tax shield for the big three, a benefit that the smaller and mid-tier miners cannot access. Smaller companies will suffer under increased compliance burdens consistent with the new governance.

The Henry tax review recommended lower tax burdens for smaller mining ventures. Clearly, the review identified a measure needed to help start-up ventures grow and prosper and to keep mining ventures, in their decline phase, alive longer. In its place, smaller and mid-tier mining ventures will pay a higher effective tax rate under this proposal. According to research released on 3 November 2011 by BDO, a highly respected research company, the mining tax liability on, for example, Rio Tinto, was calculated for the first five years as follows: year 1, zero; year 2, zero; year 3, zero; year 4, zero; and—wait for it—year 5, zero! BDO also calculated the mining tax liability for BHP Billiton. No surprises here: year 1, zero; year 2, zero; year 3, zero; year 4, zero; and year 5—you guessed it—a big fat zero. To provide a balance and in contrast to the big three mining companies, a small emerging miner who is making revenue of between $600 million and $700 million can expect the mining tax revenue for the same five-year period to be: year 1, zero; year 2, $49 million; year 3, $107 million; year 4, $96 million; and year 5, $68 million. From a point of clarity, this demonstrates that this tax is targeted at small, emerging miners.

In reviewing the mining tax we, the coalition, believe the constitutional validity of this tax requires some serious questioning. It is well known from his review that Ken Henry said that the federal government chose not to seek advice on the constitutional validity of this tax before announcing it. Without legal clarification, there is a real prospect that this clumsy piece of legislation may not be lawful under section 114 of the Constitution. As a tax on a resource at the point of extraction, it could potentially constitute a tax on state property, as prohibited under section 114.

As evidenced already within this 43rd parliament, the government has form when it comes to High Court challenges—case in point: the Malaysia people-swap decision. The very real potential exists that the government could be heading back to the High Court over this piece of legislation, alongside the cigarette plain packaging legislation it pushed through. Strong economic conditions require investment, and investors require a return on investment. This bill will not maintain strong economic conditions; it will do exactly the opposite.

The Henry tax review recommended that a national profit based resource rent tax should replace state and territory royalties and that the federal government should negotiate the federal-state implications of such a move. This was completely ignored. The government's decision that there be no consultation on the implications of the mining tax is quite worrying. The implications across the country in terms of state revenues are real. Resource royalties in WA are 20 per cent of that state government's revenue streams. Further, resource revenues in Queensland amount to nine per cent of state government revenues, and in the Northern Territory resource royalties amount to six per cent of the Territory government's revenues.

This bill will damage Australia's capacity to draw foreign investment. Increased sovereign risk brought on as a result of the retrospective nature of the tax, and the large rise in taxation comparative to the overseas sources of investment, will no doubt cause foreign investors to reconsider their positions and think twice before entering the Australian market, particularly where there are other rich resource avenues available. The mining tax is divisive, as I have already said. The government has wedged the three big miners against the remaining 99 or so per cent of mining and resource sector.

We on this side of the House know the real reason why the federal Labor government is introducing this mining tax legislation. Australia is asset rich but the government is cash poor. In fact, it is in debt to the tune of around $100 billion and that debt is growing each day. The government is unable to fund the nation's vital infrastructure projects through the usual channels due to this massive national debt. Every single day, this government borrows over $100 million. This country has never in its history been in more debt than it is now. The government cannot meet its obligations to the Australian people. Massive overspending—for example, on pink batts and school halls—is a result of poor policy. Poor governance and incompetence are the reason the coffers are dry, and that is why this government is determined to introduce this mining tax.

It is time the government stopped. It needs to step back and reassess. A start-from-scratch approach is absolutely appropriate. Development of genuine tax reform to give Australians lower, fairer and simpler taxes through an open and transparent process is warranted. The parliament should stop the mining tax from going ahead and force the government to start again. It needs to reverse its credit card mentality and get its spending under control.

One of the most concerning outcomes of this legislation is the implications for our structural deficit. The mining tax will help the government create the illusion—smoke and mirrors, if you like—of an early surplus in 2012-13. The reality, however, is less impressive. It will leave the budget worse off from 2013-14 onwards. If Treasury projections for mining tax revenue to 2020 are an indication, as released under freedom of information laws, the figures indicate that Treasury expects revenue to reduce over time. The revenue will be not only downward trending but also volatile. For the first year since the mining tax was announced, predicted revenue outcomes have fluctuated from $7.7 billion to $24 billion. If Treasury forecasts are right, as the revenue from the tax diminishes, costs associated with measures the government has attached to the tax will continue to grow strongly. To quantify this point, if we look at the cost for the proposed increase in compulsory superannuation, for example, an increase in compulsory superannuation contributions to 12 per cent is expected to see a cost rise in the order of $3.6 billion in 2019-20. For the same year, Treasury projections reveal revenue from the mining tax at $3 billion.

The Senate inquiry into the mining tax has conservatively estimated that over the next decade the net cost to the budget will be $20 billion. As already stated, the coalition does not support this legislation. The mining tax remains a tax based on an exclusive deal negotiated with the three largest miners, who were given privileged access, and there was no consideration of our local, emerging miners. This tax is divisive to the country, it distorts the national economy, it diminishes our international competitiveness, and I will not support a tax that will drive investment offshore to countries that are now offering our miners incentives, not taxes.

Debate interrupted.