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Monday, 19 March 2012
Page: 2094

Senator COLBECK (Tasmania) (12:41): I rise to make a contribution to the debate on yet another piece of bad tax legislation proposed by this government. It follows on from a number of others. As has been said by a number of people on this side of the chamber, there is a cumulative range of taxes that are having an impact on the Australian economy. We hear a lot about how we deal with and manage the two-speed Australian economy. But it seems to me that, instead of encouraging the part of the economy that is doing well and keeping it rolling, the Labor government want to tax it and slow it down to bring it back to the level of the rest of the economy. Rather than trying to lift the part of the Australian economy that is doing it tough, the government's strategy is to tax the part of the economy that is doing well and bring it back down to the rest of the field. That is completely the inverse of what they ought to be doing.

The process that we have been through to get to this particular point just demonstrates the government's lack of capacity to actually manage proper policy implementation. I have said on a number of other occasions that the government talk about evidence based policy, yet here is another demonstration of a completely ridiculous process. The government say that this tax was brought in because it was a recommendation of the Henry tax review. Of course, the Henry tax review said that, if we went down this track, it would be a replacement tax for other taxes that are currently in the system—in other words, a replacement tax for existing state royalties. But are the government doing that? Of course they are not. They are taking a piece of an approach and applying it badly—they are not conforming to the actual recommendations in the Henry tax review document—on top of everything that currently exists. And then they are saying it is only fair that these people who are making these big profits should pay their fair share of tax, the obvious implication being that they are not paying any tax as it is. Of course, if you are earning profits as a company at all, you are paying tax, you are making a contribution to the Commonwealth coffers. There has been plenty of discussion over recent years of the additional revenues flowing into federal government coffers from the profits of mining companies. What this government wants to do is to take that a bit further. It wants to get extra money out of these companies.

The government did not tell anyone about what they were going to do. They did not talk to the state governments whom they were overlaying with this new tax. They did not have any conversations about it with the state governments. They did not tell the mining companies about it. They just came out and made an announcement: 'We're going to share the profits. We're going to make sure the whole country gets the benefit of this mining tax.' They did not talk to the states; they did not talk to the mining companies. After the justifiable outcry by the mining industry, we ended up losing a Prime Minister over this process. The new Prime Minister came in and said, 'We will sort this out. We will make sure that we get a good result, and that we properly consult.' So what does the new Prime Minister do? She takes three mining companies, the three largest mining companies, into a room and negotiates a deal with them.

The revenues in the initial proposal of the mining tax have been vastly reduced in the revised version. So when the government accuses the opposition of wanting to give money back to the mining companies, the government, through the concessions it made in the negotiations following the initial incarnation of this bad tax, has given away billions of dollars more than the opposition might be considering by opposing this tax. The one who has made the greatest concession to the mining industry as part of this process is Prime Minister Gillard, not the opposition, by a factor of billions of dollars. The concessions that the government has made make what the opposition is proposing pale into insignificance. It has been a completely and utterly terrible process. Why could you then blame the smaller mining companies for complaining?

There has been a debate in the chamber this morning that I have heard about scale. Let us talk about the mega companies, the big three global mining companies, who were invited into that room. Why wouldn't the other mining companies—those who are the next level down; the Australian based mining companies—legitimately complain about the process? Why wouldn't they say: 'This is not fair. We have not been given a fair go in negotiating this process.' Why wouldn't they legitimately say that? It is quite reasonable that they say that.

Let us look at some of the specifics—a company mining magnetite, for example. Magnetite has very little value when it comes out of the ground. The government says that the mining tax is not going to hold back any mines; it is not going to stop anything. But, in the context of magnetite, the tax has the very real capacity to do that. Magnetite is a mineral that is mined in my home state of Tasmania, and the company that is mining that mineral there has turned around a mine which was effectively at the end of its life. The company made a significant change to the profitability of that mine and it is now actually making a significant amount of money. The profits from that mine are going to develop other projects in Western Australia. This tax puts that investment in doubt because magnetite has very little value when it is taken out of the ground. It is only when it is processed and either pelletised or made into a powder for export that it has value. It then potentially attracts the mining tax. The company is saying, 'This raises real questions for us.' The actual processing of the material is quite energy intensive. Not only does the company get hit with the mining tax; they also have to deal with the carbon tax because their energy costs are going to go up by potentially 10 per cent for power and nine per cent, we are told from the government's modelling, for gas, and they utilise both of those commodities. So they are potentially impacted by this tax. This is one classic example of where this tax will have a negative impact on the mining industry and where it will potentially stop investment.

The government tells us that this tax is about making sure that the country gets a fair share of the wealth from the mining boom; that the wealth is spread. But they then neglect to say that we already have a process in place to ensure that that occurs. I had a bit of look through the latest report, the 2012 update, from the Commonwealth Grants Commission on GST revenue sharing relativities. I know that my colleagues from Western Australia are a little grumpy about the fact that the percentage of revenue that they receive from the GST is receding. I get that. As a senator from Tasmania, my state gets the highest return for dollar that is paid. And I do acknowledge the comments of Western Australian Premier Barnett in relation to where Tasmania sits with mining, and to an extent I have to say that I agree with him. Some people in Tasmania are really grumpy about the statements that he has made but there is some legitimacy to them. We in Tasmania have to make up our minds as to whether or not we are going to play our role in the economic wealth of the country or whether we are going to become the country's national park. I think we should be making a reasonable contribution to the economics of the country. We have the capacity to do that, unless people who would like to turn us into a national park get their way. I do not support that process. I think we ought to be making a contribution.

The executive summary of the Commonwealth Grants Commission 2012 report on GST revenue relativities talks about the fact that Western Australia is receiving less revenue because its cost of providing services is subsidised to a large extent by its capacity to raise revenue. Western Australia has a much higher capacity to raise revenue because of its mining royalties. So we come back to the topic which has been raised a number of times in this debate and, unfortunately, largely ignored by the government members: that mining royalties are a state entitlement. It is the way that the Constitution was set up. Mining royalties go to the states and, in the allocation of other revenues through the Commonwealth Grants Commission process and through the GST revenues, that is taken into account. There is a calculation of the cost of delivering services in a state and then there is an equalisation of the amount of money that a state can actually raise itself and of what additional funding it might need from the Commonwealth to make sure that it can reasonably provide those services to its citizens. This is done so that no state is unfairly disadvantaged. It is one of the things that was set up as part of the process of looking after people across the country so that they all had reasonable access to similar services—a very fine principle. Western Australia has some service delivery costs that are much higher than, for example, Tasmania's because it is such a large state and because there are such large distances to consider. Some services cost more to provide than they do in Tasmania. For some services it is completely inverse. In the circumstance of equalisation, when you look at the executive summary, it says:

Western Australia is the State experiencing the most significant structural change to its fiscal capacity. We have assessed that it needs, in 2012-13, to spend some $724 more per person to deliver the average level of services, and invest some $126 more per person to accommodate its faster population growth.

So there are issues that Western Australia has to deal with obviously—

However these demands are more than offset by the fact that it can raise $1 859 more per capita from its own revenue sources, mainly mining royalties. In net terms it needs far less than the average GST (and the other States far more) if all States are to have the same capacity to deliver services and acquire infrastructure.

That is not me. That is not the opposition; this is the Commonwealth Grants Commission that applies a formula negotiated between all of the states and the Commonwealth to fairly distribute the revenues that the states and Commonwealth have so that there is a fair distribution at a reasonable price for delivery of services. It goes on to say:

The magnitude and speed of the change in Western Australia’s fiscal situation is demonstrated by the fact that over the past five years it has collected an additional $4.5 billion in its own revenues or $1 469 per person. In other States the increase is $473 per person. This has contributed to Western Australia’s GST per person falling by $505 over the same period.

The point is that because of Western Australia's mineral wealth—and we all are more than happy that that is the circumstance that Western Australia is in. The reality is that the myth that the government tries to put that we are trying to spread the wealth of mining boom because it is not already happening—that is the obvious implication from the government's words—is already happening through the grants commission process and the systems that are already in place to deal with it. I think that is an important point to make as part of this debate. The government tries to perpetuate the myth that the rest of the country is missing out. It certainly is not; the contribution is already being made and it is happening through the processes that we already have in place.

I want to make a couple of comments in response to some words put on the record by Senator Milne the other day. I was somewhat surprised during her presentation to get an indication of how bad she thought this tax was. She put a number of complaints about this tax on the table, not the least of which was that it was not broad enough. The Greens are obviously going to attempt to modify this tax to broaden its reach, and I suppose that is their right as a political party represented in the chamber. But it comes back to: if this tax is so bad, why are they actually supporting it in the first place?

The answer to that is demonstrated in some publicity that was recently received by Green groups who are going to use every possible method to delay, frustrate, obstruct, take legal challenge to coal projects in Australia. The real reason is that they just do not like mining. So, even if it is a bad tax in their eyes, they will support it because anything that puts a financial obstacle in the way of the mining industry is a good thing as far as the Greens are concerned. Whether that is good for the rest of the country is another question but, as far as the Greens are concerned, that is a good thing.

They do not support the mining industry, and it will be very interesting to see what the broader response to the threats to the coal industry are when that process starts. As a senator from Tasmania, it brings me back to the comments I made earlier about Tasmania effectively becoming Australia's national park. The tactics that the Greens will use on the coal industry are exactly the same tactics that the Greens have used against any reasonably sized projects in Tasmania for the last 20 or 30 years. The Meander Dam comes to mind. The site was first prepared for the construction of that dam in the early 1980s. It did not occur. When it really got momentum in the early 2000s, the process started. We found a plant: an epacris. It only exists in this river. It will be devastated by this dam being built.

Two years later, the inconvenient discovery was that it was not an epacris. It would not be devastated by the dam but it had delayed the dam for two years with millions of dollars of increased costs. By the time that process of delay tactic, of appeal, of legal action, had occurred, the dam was effectively uneconomic. It was only due to the actions of the state and the federal governments at the end of the day who were prepared to put up the money to see the project occur that it happened. The exact same process will occur to mining projects and you are actually seeing a very similar process occurring around coal seam gas: you demonise, you make it so that nothing the industry says is trusted in the public arena, and then you use every single process that you can to delay the project. And if you can delay it long enough there is a real chance that it will become economically unviable. That has happened in Tasmania to the forest industry and to a number of other industries. We are looking at the prospective listing of regions of Tasmania at the moment under the National Heritage Trust. People might think that makes sense, that it is a reasonable thing to do to protect our natural heritage. But the Greens spokesman in Tasmania has said it gives 'that little extra layer of protection' to that area from the mining industry. But what is that code for? It means it is another piece of red tape; it is another process 'through which we can appeal against a proposed development'. And what is happening? Surprise, surprise—business is walking away. Just last week we had a company say, 'We will no longer invest in this project in that region because of the prospect of its listing by the federal government.' So they use all of these layers of red tape, or should I say green tape, to stand in the way of a project, delay its commencement, delay its implementation, so that they can make it uneconomic. That is what is coming to the coal industry, and if it wants to get a good example of how those things have worked it need look no further than Tasmania.

This is a bad piece of legislation. It is founded on very bad foundations. It comes out of the Henry tax review and was misrepresented out of that process. It has not had the genuine, effective and honest negotiation with the industry that it is supposed to be applied to. It has not and does not do what the government pretends that it is going to do, because that is already happening anyway, and there are a whole range of other claims that the government makes in relation to this bill which should not be supported.