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Monday, 29 October 2012
Page: 8205

Senator CORMANN (Western Australia) (15:47): Labor's mining tax is in a complete mess. The reason that it is in a complete mess is the complete incompetence of our Treasurer.

The mining tax has been in a mess from the start, and the reason it has been in a mess from the start is that Wayne Swan, our Treasurer, did not follow a proper policy development process. He did not consult; he just came out with an ill-considered cash grab imposed on an important industry for Australia without thinking things through properly. Mr Deputy President, if you remember the time of the resource super-profits tax fiasco, it was our then Prime Minister, Mr Rudd, who lost his job while Mr Swan got a promotion.

Of course, the reason that the Labor Party pursued the mining tax back in 2010 at the time of the 2010-11 budget was that they were in desperate need of some more cash in the lead-up to that election. They wanted to create the illusion of an early surplus in 2012-13 as part of their narrative going into that election. They knew that after years of debt and deficit budgets, and after excessive spending that had left the government's budget exposed, they were politically exposed in the lead-up to that election because of their complete mismanagement of our budget.

So there was Mr Swan: he came up with the resource super-profits tax, which was clearly a bastardised version of what Dr Henry had recommended in the Henry tax review, which itself was supposed to lead to a simpler, fairer, more efficient and less distorting tax system. That first RSPT—that first resource super-profits tax—was supposed to raise $12 billion over the first two years, $37 billion over the first four years and a staggering $100 billion over the first decade. That was based on much more conservative commodity price and production volume assumptions than those which were subsequently adopted by the Treasurer, based on advice by the three big miners, who negotiated the subsequent mining tax deal with him. The reason he upgraded those mining tax revenue assumptions at the time was that he wanted to mask the true fiscal impact of the concessions that he and the Prime Minister had made in those negotiations with the big three miners.

From the RSPT to the minerals resource rent tax, the rate went down from 40 to 22½ per cent. The base was seriously contracted from all resources to just iron ore, coal and petroleum. The government, of course, gave an open-ended commitment to credit all state and territory royalties on iron ore, coal and petroleum against any resource rent tax liability, and as part of the mining tax deal they have introduced for the first time this commitment for the three big miners in particular to be able to use the market value of their assets as the starting base to depreciate the cost of their capital assets against any mining tax liability.

Despite these massive concessions, despite the significantly lower rate, despite the significantly smaller base, despite the open-ended promise to credit all state and territory royalties, including future increases, and despite the capacity to deduct the market value of relevant capital assets against any mining tax liability, the government wanted us to believe at the time that the impact on the budget bottom line was just $1½ billion from the initial resource super-profits tax to the minerals resource rent tax.

That was never believable—it was never believable! The way that the Treasurer achieved that magic trick was by upgrading commodity price and production volume assumptions significantly. When we asked him to show us the assumptions that he had used so that the Senate could scrutinise properly his mining tax revenue estimates to see whether there was any likelihood at all for those revenue estimates ever to be realised, he said, 'I can't give you that. That is commercial-in-confidence for those big three miners, who have given me those commodity price assumptions in the first place.'

Here we have a situation where those three miners not only were allowed to design the tax but were also the ones that were able to give the government the commodity price assumptions it was to use. They are hardly disinterested parties when it comes to choosing a level of commodity price assumption for the government. Then nobody else, other than those big three miners and the government, was allowed to know what that assumption was.

What has become progressively clear since then is that those mining tax revenue estimates that the Treasurer told the Australian people about back in July 2010 were never credible, because at every turn since then they have downgraded them and downgraded them more, from $37 billion over the four years of the current forward estimates under the RSPT to $22½ billion over the current forward estimates under the initial MRRT, down to $13.4 billion at budget time, and down to $9.1 billion at MYEFO time earlier last week. Now it turns out that the government have not raised a zack. No wonder the Treasurer was so desperate to keep his commodity price and production volume assumptions secret. No wonder the Treasurer was so desperate to rush the Mid-Year Economic and Fiscal Outlook out the door last Monday before he would have been forced to include the information about the actual mining tax revenue collections in the first quarter of this financial year in his budget update. No wonder the government have delivered $173 billion worth of accumulated deficits. No wonder the government are confronting yet another $120 billion budget black hole.

If you have a Treasurer in charge who comes up with a complex new tax which is costly for the government to administer, which is costly for the mining companies involved to comply with and which does not raise a cent when the government have already spent all of the money they thought they would raise, and more, no wonder you end up in a deficit situation. Labor's mining tax was a fiscal train wreck in the making right from the start, because in order to be able to raise that revenue in 2012-13, which was to help with their budget bottom line and which was to help create the illusion of an early surplus, and in order to sell that new tax politically, they attached a whole series of promises which were to take effect from 2013-14 onwards and progressively ramp up.

The mining tax, even if it had raised what the government thought it would raise initially over the current forward estimates, was actually going to leave the budget worse off, because the cost of the promises the government attached to the mining tax revenue was higher than the revenue the government were going to raise, even if all of their predictions had come through. Guess what? Now we do not have any revenue at all from the mining tax in the first quarter. That is the reason we suggested at the time—and we tried to get the support of the Greens—that the Senate should flex its muscle and refuse to deal with the mining tax legislation until the Treasurer transparently released his mining tax revenue assumptions. We had no confidence at the time that the mining tax revenue estimates that he put forward as part of the legislation were ever going to eventuate, and of course we have been proven right. At the time, the Senate in our view should have stood firm and said, 'We're not going to deal with this legislation until you actually give us the information that we require in order to be able to scrutinise the credibility of your mining tax revenue estimates.'

The Prime Minister got the Greens off her back by promising monthly updates on mining tax revenue collections. Guess what? We are now nearly four months into the mining tax and not a single monthly update on resource rent tax revenue collections has happened. This government continues with the cover-up. When you have a Treasurer who is incompetent, when you have a Treasurer who stuffs things up and when you have a Treasurer who made a complete mess of the mining tax, you have a Treasurer who has to cover up all of his tracks. He does not want to be transparent and accountable to the Australian people because he is embarrassed by the mess he has made.

I am sure that even on the Labor side there must be reasonable people who say, 'Enough is enough.' Surely even on the Labor side of the parliament there must be people who say, 'We don't want to continue with a tax which imposes costs on business, which makes them less competitive internationally and which does not actually raise any revenue at all.' The government have made a mess of tax reform. They should scrap the mining tax and start from scratch with a proper tax reform process.