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Friday, 16 March 2012
Page: 2031

Senator STEPHENS (New South Wales) (12:32): We are debating a series of bills today—the Minerals Resource Rent Tax Bill and a group of cognate bills—which will implement the minerals resource rent tax and extend the petroleum resource rent tax. It is a very important package of bills. We have heard through many thoughtful contributions and some not so thoughtful contributions in the debate here that everyone recognises that the mining boom is delivering tremendous benefits to our nation. We have heard many examples. Senators have recognised and acknowledged the extent to which mining investment is supporting activity in their own states, particularly the Western Australian and Queensland senators, who of course are keen to support mining interests in their states.

But I think every speaker in this debate has acknowledged that the mining boom will not last forever. Resources that are non renewable need to be acknowledged and managed, and we as a nation have to acknowledge and manage that. We all do recognise it and, though the opposition are arguing that the jam jar will eventually be scraped clean and that is a reason for the mining companies not to participate in the minerals resource rent tax, we on the government side believe it is only right that the profits from finite natural resources should be shared among all Australians and not just be reserved for a few.

Senator Ian Macdonald: It's called 'royalties'!

Senator STEPHENS: I will come to the royalties issue in a moment, Senator Macdonald. The extent of the resources we are dealing with is very clear, but perhaps those who are listening to or watching this debate might not understand the quantum we are talking about. Mining profits for the year ending 30 June 2011 were approximately $93 billion, and that is more than two-thirds of the size of the whole New Zealand economy. Twiggy Forrest's company, Fortescue Metals Group, had a net profit of $985 million, Xstrata had an operating profit of $4.25 billion, Rio Tinto had a first-half profit of $7.6 billion and BHP Billiton had a yearly profit of $22.48 billion. We are talking about very serious amounts of money, huge amounts of money. In fact, mining profits have increased by 262 per cent in the last decade. But, at the same time, the Australian people's share of the profits from our natural resources has actually declined.

Fortescue Metals' tax manager conceded to a parliamentary committee last year that, despite the company being valued at $16 billion, they actually have not paid corporate tax for seven years. How extraordinary is that! It is, quite obviously, very unjust. But on Sky News last year the Deputy Leader of the Opposition said the mining companies are paying a fair amount of tax, and next day the shadow Treasurer said he thought mining companies pay a fair share. Really? Could this be a mistake? The Leader of the Opposition went one better when he told 2GB listeners that mining companies are paying more than their fair share. He appears to want miners to pay even less tax than they do already. Seriously, Mr Abbott has actually gone on record saying that this tax is almost guaranteed to kill the mining boom stone dead.

Well, the facts do not actually support that argument. We have had opposition speaker after opposition speaker using the Chicken Little approach—'the sky is falling'—and they argue that 'we'll all be rooned'. But that is simply not the case. We believe Australia is the land of the fair go and, as a democratic government, it is our responsibility to distribute the nation's wealth equitably. But, under the current taxation framework, the proceeds from the mining of iron ore, coal, oil and gas are distributed in ways that benefit only a privileged minority. That has to change, and that is what the minerals resource rent tax package is designed to achieve. The Minerals Council has admitted that there is 'a strong argument to reform the basis of determining royalty payments' and that, instead of revenue criteria based on either the volume or the value of production, it should be levied according to profits based criteria. The Minerals Resource Rent Tax Bill does exactly that. It replaces the previous royalty tax and directs the revenue towards vital investments in infrastructure such as roads, rails and ports—those critical infrastructure needs that, of course, are used by the mining industry—and also towards tax breaks for businesses struggling with the pressures of a patchwork economy and towards an increase in the superannuation guarantee to boost national savings and provide secure retirement incomes for future generations. And as rising interest rates and higher terms of trade push up the Australian dollar and decrease export demand, we have to do whatever we can to ensure our manufacturers and our exporters, including our farmers, outside the resources sector do not suffer. So the minerals resource rent tax is an indicator of this government's effort to manage our patchwork economy and to distribute the proceeds of our booming mineral resources more equitably.

The Minerals Resource Rent Tax Bill provides for the taxation of above normal profits from mining iron ore and coal. Collectively, this bill and the related bills are designed to restructure our economy and future-proof it against international market volatility by strengthening our domestic industries and distributing the proceeds of our mineral wealth to every Australian via a sustainable and internationally competitive taxation framework.

The minerals resource rent tax will apply at a rate of 30 per cent to all new and existing iron ore and coal projects, but subject to an extraction allowance that reduces its effective rate to 22½ per cent. Small miners, those that we heard many concerns about in the chamber this morning, with annual profits—not annual turnover, but annual profits—below $75 million will not be affected at all by the MRRT, while miners with annual profits between $75 million and $125 million will benefit from a partial reduction in their minerals resource rent tax liability. The tax is expected to raise an estimated $3.7 billion in the 2012-13 financial year, $4 billion in the following year and about $3.4 billion in the year after that. Over 10 years the tax is expected to deliver about $38½ billion in government revenue back to the Australian people.

The MRRT will also allow for an increase in superannuation contributions, gradually lifting the mandatory superannuation rate from nine per cent to 12 per cent, beginning in July 2013. In my own state of New South Wales this will boost the savings of over 2½ million working people. A former leader of the Liberal Party in New South Wales, John Brogden, who is the CEO of the Investment and Financial Services Association, has described the MRRT as 'a visionary policy'. He said:

It's visionary for Australia's retirement outcomes and it's visionary for the Australian economy.

He is right. The leap in superannuation contributions from nine to 12 per cent will ensure that over half of the Australian population will have an adequate retirement fund instead of completely relying on the age pension.

What has really interested me about the commitment we are making to an investment in superannuation is the way it will affect the retirement incomes and savings of women. There is a very serious challenge in terms of Australian women's financial independence and I think it is very important that we address the issues of equal pay and the structural imbalance in our superannuation system. Right now, the 3.6 million low-income Australians, including around 2.1 million women, get no or minimal tax benefits from contributing to superannuation due to the fact that the 15 per cent superannuation contribution tax is above or equivalent to their income tax rate. Let us have a look at that. It means that more than 3½ million Australians, three out of every 10 workers, do not get a tax benefit from contributing to superannuation and 2.1 million of them are women—and that is three in every eight women who are in the workforce. In New South Wales it is 1.1 million workers. So it is very important that we think about that significant reform and what it is going to do to fund the retirement incomes of women.

Getting back to supporters of the MRRT, another unlikely supporter perhaps for those opposite who are so opposed to it is the former federal leader of the Liberal Party, Dr John Hewson. He has stated that 'in policy terms this tax is right' despite the 'posturing' from the mining industry. A lot of negotiation and consultation occurred around this legislative package, despite what the opposition would have you think. The problem with the opposition is they think that unless you agree with them it does not constitute consultation. But a lot of thought, a lot of research and consultation with experts, industries and the community have gone into this package of legislation. For instance, major concerns about coal seam gas, especially in New South Wales, have emerged from community consultation and the government has taken those concerns very seriously.

We have improved the governance arrangements for coal seam gas to ensure that future decisions about coal seam gas projects and large coalmining developments are based on the most significant scientific research available in order to maintain community confidence, especially with regard to the impact on water. We will provide $100 million to establish a new, independent, expert scientific committee to provide the scientific advice to governments about relevant coal seam gas and large coalmining approvals where they do have a significant impact on water. The committee will oversee research and also establish a new national partnership agreement with the states through COAG, agreeing that the Commonwealth and the states have to take into account the advice of that committee in their assessment and approval decisions. We recognise that it is not sufficient to argue that the coal seam methane gas industry is important—as it is—without also taking into account our quality of life, the quality of our environment and our water security, which are also important factors to be weighed up. Through the Regional Infrastructure Fund and the Regional Development Australia Fund we will be investing in evidence based improvements in mining related infrastructure.

Not long ago in the Newcastle Herald Michael Pascoe wrote:

The immediate test of whether a party is fit to govern is the minerals resources rent tax.

He put it as plainly as that. He went on:

In economic terms, it's a no-brainer …

So does this mean simply that the opposition does not understand it? Or is their refusal to see sense in this matter merely a knee-jerk reaction? We know they opposed the petroleum resource rent tax with the same approach when it was introduced by the Hawke government in 1986 and then proceeded to quietly collect the revenue throughout the Howard years. So I think we can take the protestations we have been hearing with a handful of salt—not just a pinch of salt!

The truth is that these bills are a positive move forward for the Australian economy. The government will use the revenue from the MRRT bills to reduce the tax rate for companies to 29 per cent. Given the argument we are having with the opposition and their lack of support for that, it will be a struggle as we debate these bills. The bills will give Australia's 2.7 million small businesses a $6½-thousand instant asset write-off from 1 July next year. In my home state of New South Wales, that is 890,000 businesses that will benefit from this legislation. Doesn't this make more sense than continuing to line the fur-lined pockets of a handful of companies that have already benefited from an unfair taxation framework?

This is the choice for us. Do we recognise that many Australian businesses are struggling with the high Australian dollar and struggling to get the workers they need? Do we let the benefits of the coming mining boom be squandered like they were in the last one? Do we ignore the challenges for the nation and for businesses struggling with the pressures of a patchwork economy? Or do we recognise that many parts of the country, especially our great mining regions, have extra infrastructure needs? Do we support a revenue stream that will fund billions of dollars worth of new roads, bridges and other critical infrastructure, including the critical Gateway project in WA? Do we support the retirement savings of Australians by increasing the superannuation guarantee and boosting the savings of 8.4 million Australian workers by $500 billion by 2035? Do we deliver fairer super concessions for 3.6 million low-income earners who currently get little or no concession on their employer's superannuation contributions? They are the questions we are asking, and the answer for us is: that is the critical issue—that is what is of importance.

In the time I have left available to me in this debate I want to go to the issue of the royalties furphy that was just propagated by Senator Macdonald. First of all, as I said earlier, mining profits have jumped 262 per cent in the last decade. Along with the coal and the iron ore, a large share of the profits is shipped overseas as well. So the current arrangements fail to provide an appropriate return for those non-renewable resources to the Australian community, who own those resources 100 per cent. The royalties do not keep up with the booming profits of our miners, because royalties are often taken as a flat amount of revenue or production, regardless of profitability. Tax on profit means that the higher your profit the more tax you pay. It is a far more equitable way in which to deal with the mining boom we are currently seeing and the one we will see emerging in the future.

A tax on profits returns more to the nation when times are good, as should be the case, and relieves the tax burden on the industry when times are bad. A tax on profits automatically relieves struggling miners and their communities of tax when times are tough, unlike royalties. And that is the point that perhaps has not been made very clearly by the opposition. We will see volatility in minerals resource rent tax revenue, particularly as prices and investment plans change. But that is good for the nation and for the industry, and that is why the minerals resource rent tax has been structured the way it has.

Australian people will get a better share of the bounty of this mining boom, and the government will use this share to develop a stronger and broader economy. We will ensure that the dividends of the boom are actually directed to where they can make the greatest contribution to jobs, to infrastruct­ure, to national savings and to sustainable economic growth. These new tax arrange­ments also represent a cooperative approach between industry and government in the major business of tax reform, a process we are also undergoing in this nation, taking into account the much bigger picture, the taxation reform and the strong legislative agenda that we have around those bills.

The bills provide for a robust resource rent tax regime and ensure that the long-term attractiveness of investment in Australian iron ore and coal is maintained. There are naysayers who say it is going to ship all our mining offshore, but do not be conned; that is a nonsense. You only have to look at the massive $430 billion pipeline of investment in our mining sector—and $82 billion of that is for this year alone—to see that the industry has great confidence in its future in Australia. Mining companies are investing in the future in full knowledge of the commencement of the minerals resource rent tax. As I said, the tax will apply at a rate of 30 per cent to new and existing iron ore and coal projects.

Because the MRRT taxes only the most highly profitable mines—again, not turnover but profit beyond $75 million a year—Australia will remain an attractive destination for resources investment. Unlike royalties, the MRRT recognises the massive investments miners make. The tax does not apply to the value added by miners through processing. It applies only to the profits attributable to the resources at the valuation point just after extraction and to projects that are able to immediately write off new investment and immediately deduct expenses. So no MRRT will be payable until the project has made enough profit to pay off its upfront investment. We expect the big miners to pay the bulk of the MRRT and to pay it from year 1. That is based, again, on extensive consultation with the industry.

Let us not be conned that this is going to change the nature of mining in Australia. We have a huge investment and we have a huge natural resource, but it is a nonrenewable resource and it is only right and proper that we share the benefits of this mining resource with Australians by ensuring that there is a distribution of the gross and excessive profits of the mining industry as they occur. To me, that is a no-brainer: that is what a good Labor government will do. That is what we will ensure happens, that we share the benefits and the wealth of the mining boom with those who do not have the fortunate opportunity to be part of it directly.