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Monday, 29 October 2012
Page: 8217


Senator EGGLESTON (Western Australia) (16:39): There is no doubt that the government anticipated huge revenues from the mining tax, and that their estimates of revenues which would come in varied enormously. For example, in July 2010 they estimated the tax would raise $10.5 billion over the first two years. Then came the 2010 MYEFO, when the revenue was downgraded to $7.4 billion. Again, in the budget in 2011 revenue estimates actually increased to $7.7 billion for the first two years and then were increased again to $11.1 billion for the first three years. The government, quite obviously, was living in a fantasy world because right from the start this tax was never, ever, going to raise any money.

Senator Joyce in particular has referred to this tax as a deal done between the three big miners—between Rio Tinto, Xstrata and BHP Billiton—and the government, in which it was agreed that the costs associated with the establishment of their mining operations over the last 25 years would be deductible against revenue received. If the big miners are able to claim the billions and billions of dollars that they have spent in setting up these great mines which we find today in the Pilbara and in other parts of Australia, such as Queensland, with the coal mines, or in the Northern Territory, then of course the end result is going to be something like negative gearing on an expensive property. The investor will be paying a lot more in interest rates, which are deductible, and interest payments than the rental which is coming in from the property. The net result is that, in the case of the mining companies with their huge deductions for the development of their infrastructure, there would be no super tax liability. That was a fact which was obvious from the start, and it is quite clear that this government has lived in a kind of fantasy about what this tax would deliver by way of revenue and what would be done with it. As I have said, it was very obvious right from the start that this tax was not going to raise the kind of money which the government expected it to.

The one group which did find itself liable under this tax, possibly, was the small miners—the AMEC level miners are the people who go out, explore and discover new deposits, but who, unfortunately, do not have the kind of level of deductions that the big miners have. So inevitably, were they to fall into the category of having excessive returns, they would have had to pay this super tax. But in fact it seems that even their income has not reached the levels which would make them liable for this tax, because there has been a great decline in the revenue from the mining industry—in part, I have to say, because of the introduction of this tax, which has changed Australia and the perception of Australia as a safe destination for investment by the mining industry. A country of very low sovereign risk is how we were perceived; but now the perception is that this country is no longer a safe country for mining companies to invest billions of dollars in, because the government is going to impose excessive and unreasonable taxes on such investments.

And that perhaps is one of the greatest outcomes of this tax. It has not raised any money, but what it has done is increase Australia's sovereign risk and decrease the perception that Australia is a safe place to invest.

Where has the investment gone? It has gone to Africa and other parts of the world. As we know, there has been a drop in mining income because the Chinese, in particular, have reduced their purchases of Australian iron ore and other commodities. The income of the mining companies has reduced—that was not predictable.

The government, it seems, was fantasising for a very long time about what this money would be spent on. Let us have a look at some of the proposed expenditures. It was in July 2010, for example, that the government estimated the tax would raise enough money to provide for a 50 per cent discount for interest income; a lowering of the company tax rate—a promise made but broken in the 2012-13 budget; an early start to cut the company tax rate for small business companies; a standard deduction for work related expenses and the cost of managing tax affairs and so on.

While this government was living in a world of fantasy, imagining that the MRRT was going to bring in billions of dollars in tax, even though right from the start that was obviously not going to be the case in the view of any objective observer, it was making all sorts of promises about how this money would be spent. It just shows that this government lives in a world of fantasy and does not deal with reality. This tax, as predicted, has raised no money and is purely and simply proof of the government's delusional approach to government. (Time expired)

The ACTING DEPUTY PRESIDENT ( Senator Bernardi ): Order! The time for this discussion has expired.