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Friday, 16 March 2012
Page: 2023


Senator PAYNE (New South Wales) (11:58): As many of my colleagues have said before me, and particularly in the eloquent contributions of my colleagues from Western Australia who have spoken already today, the minerals resource rent tax is a bad tax. It is pretty simple: it is a bad tax. It is not fiscally responsible, it is distorting, it is unfair, it is complex and it is divisive. It will reduce our international competitive­ness, and the process of its development beggars imagination in its lack of competence. It will penalise the most successful industry of this century and, as I just said, make it less internationally competitive, all in some latter-day wealth redistribution attempt to satisfy some ancient Labor gods, I suppose. You do not have to be involved in the mining industry to know that it is an inherently risky business, even aside from the sovereign risk that this kind of tax would create. What the Treasurer and Labor should consider is the fact that the record mining profits we have seen in recent years are not normal. They are not guaranteed to continue forever. It is called a boom for a reason, semantically, because what follows boom? No more boom! That is the whole point of considering the context of imposing a tax like this with such extraordinary short-sightedness. It appears that the Treasurer and this government think that the mining industry is just another cash cow which will fund their out-of-control spending habit. That is simply not the case. This is not an endless dream, and one day the rest of Australia will wake up and find that not only was it not an endless dream but they endured an absolute nightmare from those opposite, who are the horror stories inhabiting that dream—every single one of them.

Perhaps the next time Mr Swan decides to mount an attack on wealthy individuals, apparently for no other reason than their wealth, he should remember who it is that picks up the tab for their follies. Who picks up the tab for school halls and pink batts? Who picks up the tab for the clean energy finance slush fund, which is just going to prop up inefficient and expensive renewable energy technologies? You decided not to mention pink batts, and I can understand that because it is pretty humiliating. The mess that you created in that so-called stimulus scheme is pretty embarrassing. Pink batts—bats in the belfry, I suggest.

More importantly, the Treasurer has to answer some very important questions about the tax. For example, we do not know whether the government has factored in the cost of the commitment to credit all state and territory royalties against any MRRT liability following the decisions by Western Australia, New South Wales, South Australia and Tasmania to increase royalties on either iron ore or coal. We do not know that. The government is not prepared to tell us that. The government needs to come clean on whether estimates of gross revenue have been revised up to take this into account. We need to know, and it is not an unreasonable question, why the government still will not release the mining tax revenue assumptions, including commodity price and production volumes, both of which are regularly published by the Western Australian coalition government and the Queensland Labor government. Will this government come clean? No. Will this government respond to orders to return documents? No. Is this government contemptuous of this parliament? Yes.

The government should also tell us why it has not provided full costings of all associated measures related to the mining tax, including the proposed company tax cut, the early start company tax cut for small business and the changes to superannuation contribution caps over the forward estimates. Finally, we need to know how much the upfront tax deduction handed to the bigger miners by the Gillard government, courtesy of the market valuation, will cost the budget bottom line.

None of these questions is unreasonable, not in a transparent government or in a fair and open government; but, of course, one cannot expect that from the other side. If the government believes that this tax will be good for Australia, then that is the sort of information that should be released immediately. After all, one imagines—and I am sure my colleagues agree—that it would support the case; otherwise, what could they possibly have to hide? That is what the Australian people also want to know.

What we do know about the mining tax so far makes for very sorry reading. We know that it is a tax that was not developed using proper processes. Its rather ugly birth came out of Kevin Rudd's ill-fated resource superprofits tax, which was itself announced without consultation with anyone. There was no consultation with industry and there was no consultation with state and territory governments, despite the very serious implications for their own budget bottom lines. But we are used to that from this government, aren't we!

The Henry tax review recommended a national profit based resource rent tax to replace state and territory royalties and that the Australian government should nego­tiate—an interesting concept but one that appears to be slightly lost on the other side—the federal and state financial relations implications of such a move. The former Prime Minister Rudd and Mr Swan failed miserably at that task, and nothing has improved since.

The government did not have the courage to negotiate with the states to achieve genuine tax reform. Instead, it just came up with loopholes to make the system more complex and even messier. The new Prime Minister promised to fix the mining tax as one of the key planks of her 'decision and delivery mode' following her ousting of Mr Rudd, but we all know that the reality was very different. Ms Gillard, her Treasurer, Mr Swan, and the Minister for Resources and Energy did this particular deal in secret negotiations, creating even more challenges as a result for the ability of small and mid-tier miners to compete. Small miners either will end up paying the MRRT sooner or will continue to pay royalties on production while also being hit with increasing compliance burdens—and these are just the compliance burdens in this context, without even going into the extra regulatory burdens that the federal government is currently imposing on business in this country.

Labor still has not consulted adequately with state and territory governments about the implications for them of the mining tax, despite the fact—and my colleague Senator Back put this very well earlier today—that the resource royalties account for 20 per cent of Western Australian state government revenue. He was speaking specifically about his experience as a Western Australian senator. These royalties account for nine per cent of Queensland state government revenue and six per cent of New South Wales state government revenue, and have major implications for the GST-sharing arrangements. Apparently, this does not have to be taken into account.

The Henry tax review advocated root and branch reform to deliver a simpler, fairer tax system. One would not have thought this was an unreasonable proposition. Instead, the mining tax proposal we have ended up with is more complex. We have 287 pages of tax law, which is an increase on even the first draft, which was 161 pages. It takes a lot of effort to create that much regulation—the government is really putting its shoulder to the wheel there.

The Henry tax review recommended a lower tax burden for smaller mining operators. However, under this Labor tax that we are debating here today, small and mid-tier miners will pay a higher effective tax rate than the big three, which many of my colleagues have referred to today, who ended up with the rails run in negotiations with the government. It will reduce our international competitiveness, which is not something that we can afford to have happen, quite frankly, in the current global economic situation. It will encourage prospective investors to take their money to countries with lower tax rates. Why wouldn't they? Why would they stay here? That is a question that those on the other side cannot answer. Unlike even the Hawke-Keating government of the 1980s, what we have now is a Labor government which is completely focused on cutting the cake into smaller pieces rather than trying to find policies that actually make the cake bigger. If you think that is illogical, you would be right. In completely true Labor style, this MRRT package is going to leave the budget in a weaker position and worsen the current structural deficit. Only Labor could design and try to introduce a multibillion-dollar tax that will see more money going out than coming in.

As my colleagues Senator Cormann and, I think, Senator Abetz have said in previous contributions, the revenue from this tax is highly volatile and downward trending. In fact, over the first year since the tax was first announced, revenue estimates have varied all over the place. They have varied from $12 billion for the resource super profits tax, as it was known, to $24 billion with revised commodity price assumptions, right down to $10.5 billion under this minerals resource rent tax. That figure then fell even further, to $7.4 billion based on exchange rate changes. Then it increased slightly to $7.7 billion after further rate changes—and so the list goes on. Treasury forecasts of MRRT revenue to 2020—those ones we have been allowed to see, of course—show revenue reducing over time as commodity prices return to more normal levels after the current record highs.

Importantly, the cost of measures the government has attached to the mining tax will continue to grow strongly over time as well. The cost of the proposed increase in compulsory super to 12 per cent alone is expected to rise to $3.6 billion in 2019-20, which is when it would be fully implemented. That figure of itself dwarfs the projected $3 billion revenue of the MRRT. While the tax might help the government produce an imaginary surplus in 2012-13, it will actually end up leaving the budget worse off from the next financial year after that onwards. Over the next decade, as the Senate inquiry into the mining tax has conservatively estimated, the net cost to the budget, which is revenue minus the cost of related measures, will be $20 billion.

This tax also makes the federal budget hostage to state government variations to royalties on iron ore and coal. State governments in Western Australia, New South Wales, South Australia and Tasmania have increased royalties on iron ore or coal, at a cost to the federal budget of approximately $3 billion. Why wouldn't they? Why would that not be expected in the absence of genuine negotiations with the states on this issue? As the shadow minister for COAG said to me, it is an all-too-familiar story. There is also the important issue of constitutionality, something on which it appears the government has never sought advice, and questions need to be asked in that space as well in terms of state and federal relationships. We have seen several mining ventures. We have seen the Western Australian state government flag High Court action if this tax passes the federal parliament.

It is not just destructive to the mining industry as a whole; it is particularly destructive because it is discriminatory. It is discriminatory against small and emerging miners. I assume that in Prime Minister Gillard's desperation to take the disastrous resource super profits tax off the agenda she made a deal with the big three miners without properly considering the impact on the future of the rest of the industry—so many of those participants in this industry which are so important to our states and territories.

This is a tax which is divisive, as I said right at the beginning. It divides this industry and it turns different parts of the economy against each other. Sixty-five per cent of mining tax revenue will come from iron ore production in Western Australia, which this government apparently regards as a quarry with many resources and not very many voters. Well, it will soon learn about that when the Western Australians are forced to deal with this if it passes this chamber. It is extraordinary that a national tax would result in around $25 billion of the $38.5 billion forecast to be raised in the next decade being taken directly from one state, and there has to be a better way.

You can achieve genuine tax reform. You can achieve it sustainably with a process that involves properly consulting all stakeholders openly and transparently. Consultation does not mean presenting a fait accompli and then publicly denouncing stakeholders that have the temerity to raise concerns about the policy and the process. What we should be doing in this chamber today is stopping the MRRT from going ahead and we should be insisting that the government go through a process that includes the states and the wider mining sector. How is that an unreasonable proposition? It simply is not. Instead of levying a tax with uncertain revenue prospects and a net loss of taxpayers' money, without consulting the bulk of Australian miners or the states that own the minerals, this government should get its own spending under control and should be focused on lower, simpler and fairer taxes.