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Tuesday, 5 May 1987
Page: 2339

Senator BROWNHILL(8.51) —I rise to support Senator Durack and other speakers from this side of the chamber who have preceded me in this debate. I also take pleasure in hearing that Senator Siddons agrees with the Opposition parties in this debate. The purpose of the Petroleum Resource Rent Tax Assessment Bill 1987 and its allied Bills is to assess and collect the resource rent tax on profits from certain off-shore petroleum products. The Bill was opposed by the Liberal Party and the National Party of Australia in the House of Representatives, but was passed in that House on 25 March of this year. The tax is to apply to taxable profits from the recovery of petroleum in off-shore areas where the Petroleum (Submerged Lands) Act 1967 applies, other than in areas covered by production licences granted on or before 1 July 1984 and the permit areas from which those production licences were drawn.

There are four Bills in the package. The Petroleum Resource Rent Tax Assessment Bill 1987 provides the framework of the tax and defines where the tax will apply, how it will apply and how it will be paid. The Petroleum Resource Rent Tax Bill 1987 will formally impose and declare the rate of tax at 40 per cent. The Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill 1987 will amend other legislation, including the Excise Act to which the RRT applies. The Petroleum Resource Rent Tax (Interest on Underpayments) Bill 1987 will impose an interest charge in respect of underpayments on the petroleum rent resource tax. Crude oil production is subject to Commonwealth excise duty and to State royalties. The rate of excise varies depending on whether the field is an old or new field. But as with royalties, the amount of excise payable is directly linked to the amount of production.

The main difference between the existing excise and resource rent tax is that the resource rent tax is based on profits earned and will rise and fall with profits, thereby allowing the Government to share in any windfall profits that may arise. The purported profit based tax, designed by this Government to replace the crude oil excise and royalties system, is just another government disincentive to an important Australian industry. The rate of tax will be declared at 40 per cent by the Bill and will apply where there is an excess of project related receipts for a financial year over both project related expenditure for the year and the undeducted expenditure of previous years brought forward at a compound rate.

During debate of the Bill in the House of Representatives the Liberal and National parties argued that a resource rent tax would further increase and complicate Australia's taxation laws. Of course, in this legislation we have 60-odd pages of confusion adding to the tax laws. This industry is already highly taxed. In fact, Senator Gareth Evans has recently admitted that the Government's take from Bass Strait is relatively high in comparison with that of other countries. The petroleum industry is taxed in a most discriminating way with a wide range of taxes; not only this tax of course but also company tax, capital gains tax, fringe benefits tax and royalties, and it has always had to pay an excise on production. Now it is being threatened with the resource rent tax to take the place of the excise and the royalties in some off-shore areas.

All these taxes may have been sustainable when the price of a barrel of oil was approximately $43. But Bass Strait crude is no longer worth anywhere near that amount. It is now worth only some $29 a barrel. When the Government insists on taxing industries out of existence, of course it also drives those industries out of the country and to other countries such as the Philippines. The Government has also driven this industry to countries such as Canada and the United Kingdom. The governments of those countries have recognised the need for oil exploration and have given encouragement to the companies to go there. The large drop in the price of a barrel of oil is fraught with a great deal of danger because the money that is being spent on oil exploration is falling. In fact, this year the Australian Petroleum Exploration Association said that the money spent last year on oil exploration was some $278m. This year only $165m is being spent on oil exploration. That is a fall of some 40 per cent on oil exploration expenditure in the last two years.

Of course this Government, which is so worried about taxing an industry out of existence, should also be worried about the loss of jobs in the petroleum exploration industry. Some 3,700 jobs were lost in the oil exploration industry in 1986 alone. I suppose that has a little to do with the fact that the number of off-shore exploration wells has fallen from 49 in 1983 to 43 in 1984, to 36 in 1985 and to 29 in 1986, and the forecast for 1987 is only about 14. The Government's disincentive to the industry and the falling prices in the industry do not bode well for Australia's future.

The new tax will mean that new oil discoveries will attract a tax of something like 70 per cent, taking the company tax plus the resource tax into account. That compares with only 56 per cent before this tax was mooted. As I have already said, other countries are encouraging oil companies to go to them and if that trend continues we will not have an oil exploration industry in our country. I will quote from an article by Frank Colyer in the most recent National Australia Bank Ltd publication. It states:

Without replacement oil, says APEA, we could be importing oil at $US40-100 per barrel (1987 dollars) by 2000. The strain on the Australian economy of importing oil at $US100 per barrel does not bear thinking about; and oil priced at $US40 per barrel would be no lightweight either, particularly with self-sufficiency down to 40 per cent.

There is an imminent decline in Australia's level of self-sufficiency and this will have an horrendous effect on the economy. I think the views of the industry should be taken into account. It is totally opposed to this legislation. The fact that this legislation has been contemplated by the Government for some two years does not do the Government any credit whatsoever. The legislation is going to have all the disincentives that I have already mentioned. It is going to have an effect in future years because of the lack of overseas income. Because we will be importing so much oil our own resources will not be fully utilised. I think that is to the great discredit of this Government. The Opposition is totally opposed to the resource rent tax and will be voting against it. I trust and hope that the Australian Democrats and all the Independents in this place will vote with us to make sure that the Bill is defeated.