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Monday, 6 December 1976

Mr CREAN (Melbourne Ports) - I do not deny the importance of the mining industry to Australia, but I must say that I have a few more reservations than my friend the honourable member for Lilley (Mr Kevin Cairns) has about the taxation system being the best way to reward the rnining industry. If I may say so, the amendments that are propounded here are pretty handsome rewards indeed to very limited sections of the totality of the Australian economy. It is nice to talk about mining as though there were a lot of humble prospectors digging holes here, there and everywhere, perhaps running risks, some being rewarded and some not. But the basic minerals we are talking about at the moment are the 2 great ones, coal and iron. Australia happens to have a magnificent abundance of both. Candidly, I have the old-fashioned view that they belong to the people of Australia because they are in the ground, but we seem somehow to think that somebody who happened to hit upon them is entitled thereafter to exploit the rest of the community. I do not know why we needed American techniques to develop the coal industry in the State of the honourable member for Lilley (Mr Kevin Cairns), who is trying to interject. The coal deposits were virtually handed to the companies involved by the Premier of Queensland so far as the terms of exploitation are concerned. Admittedly, we get a fair bit of it back because company tax, being as high as it it -

Mr Kevin Cairns (LILLEY, QUEENSLAND) - That is about the least of what you get back.

Mr CREAN - If the mining companies make a profit something like half of it is taken back in net tax. But the Government objected to what we regarded as an excess profits tax- and there was no doubt who the principal victim would have been. Candidly I could not see anything wrong with it. The firm concerned, Utah, had a bonanza on very favourable terms, yet the Government objected on the grounds that it would hurt somebody else. It it was genuine about hurting the small people, fair enough, but I think the Government was unduly solicitous about what it did to the big people in the process. I do not deny that there are more prospects, resource wise, for getting value for money out of developing mining in Australia in the next ten or fifteen years than out of probably any other enterprise we can think of, but I do not think that is any reason to featherbed the companies and to use the tax system to reward people for basically exploiting the nation's resources.

I am surprised in some respects at the attitude of my friend, the honourable member for Lilley (Mr Kevin Cairns), for whom I have great respect because he is a person who at least applies himself to the anatomy of these debates. I do not believe that the tax system should be used in this way. After all, there is an argument as to whether the write-off ought to be 20 per cent over a 5-year reducing period or whether, as my colleague suggested, there should be a 10-year period. It makes a lot of difference to the mining company that one is chosen rather than the other. I should have hoped that there would have been more extensive debate about this than there has been.

Mr Kevin Cairns (LILLEY, QUEENSLAND) - It does not receive more assistance than any other industry, of course.

Mr CREAN -I do not think it should be any better treated. What I am trying to suggest is that it is different from any other industry. The honourable member referred to the mining industry. He should at least define what the mining industry is. He mentioned the figures for exports in these areas. I have the figures for the year 1974-75 with regard to the export of iron ore and coal. Receipts for the export of coal amounted to $664m and for iron ore the amount was $707m. Something like 80 per cent of the total went to one country, Japan. It went via one or two big endues. When one is talking about the mining industry, I think, with all respect that one is talking about 2 pretty gigantic areas. One is not talking about little people digging small holes. One is talking about big undertakings, mostly foreign owned, if I may say so regretfully, which are taking, at terms very advantageous to themselves, Australia's natural resources and exporting them to another country. I have no objection to Australia sensibly giving to another country access to the things that it has in abundance, but I have a great resentment of featherbedding those who are doing very well already. The amendments in this BUI make those who are very well off, without them very much better off in future.

I do not want to get into the argument tonight about devaluation. It has happened. I have always taken the prudent course; I think the Government was foolish not to defend the position that it claimed it wanted to defend. I believe that it caved in to resistance within its own ranks. I think that whereas previously the only ramp that was organised in favour of devaluation was a rural one, on this occasion it was joined by mining and manufacturing interests and it proved to be an irresistible force. I was a little intrigued to hear the Treasurer (Mr Lynch) say that he believed the currency was over-valued when the Government came to office. He certainly took a long time to reach his decision. If he wanted to devalue then, he ought to have done it then. When he kept saying over and over again that the Government would hold the currency at its former rate, I think that the Government proved recreant to the sense of responsibility that a proper government ought to have. Nevertheless, there is no doubt who some of the main beneficiaries Will be. They have contracts for coal and iron that are written in yen or in US dollars. They will be considerable beneficiaries when their costs are incurred in Australian dollars. I suppose we can console ourselves because we receive near enough to half the profit. That seems to me to be very cold consolation.

I want to say one or two things about taxation generally. I must say that I am pleased that the cold-hearted Treasurer has, at long last, yielded to what I regarded as the moral promise I gave when I was Treasurer. That was that the funds of the thalidomide victims would be free of tax. I have the greatest admiration for the officials of the Taxation Office. While they offered aU sorts of objections to me, I said this was one of the decisions I wanted to make. I do not believe that there is any case in history like it and I hope that there will subsequently be no other case like it either. To suggest that if one assists these people one must do something for victims of recurring societal accidents was, I think, a lot of nonsense. I am pleased to see that the Treasurer has finally yielded.

The honourable member for Lilley made a great play about how taxation has been reduced and about the difficulties of comparing this with that. It will be very difficult from now on to compare the yields of taxation year by year now that this new system of taxation has been introduced. I invite the honourable gentleman to look at what is expected to be gathered from personal income tax. My mathematics show that this year there will be a 25 per cent difference in the yield from personal income tax. It is all right to say that if this had not been done it would have been great. But what is taxation reduction about? Surely the Government reaches a point at which it concludes it is taking too much. If the Government then makes reductions and takes great credit to itself, saying: 'Had we not altered this, the yield would have been so much', again I ask: 'What is it that we are really talking about?'

Honourable members opposite claim to be the reducers of taxes. I am not the great admirer, as some honourable members opposite are, of the so-called indexation formula. I suggest that it is so cast that it means least to the person at the bottom of the wage scale and most to the person at the top. It is not the sort of formula that I would regard as the most equitable. AU it does is alter the pace at which a person goes from step to step within the scale. The greatest advantage is to those people higher up the scale. It does not matter that the formula is called indexation. It is like a lot of other things to which certain names are given. A lot of people are confused by the giving of names.

The same confusion arises with what is called accounting for inflation. Mostly the accounting for inflation makes great play about the asset side of the balance sheet and ignores altogether the liabilities side. I am still one who believes that if the fault is in the accounting period we perhaps should have daily, monthly or quarterly balances. But we have the yearly balance because unfortunately government accounting is involved with the financial year. I wish at least a little more time was devoted to the fact that no matter how the assets are depreciating equally so are the liabilities. Most balance sheets as I understand them finish with an overdraft rather than with a net asset position. Naturally to that extent they are more concerned about the liability part than the asset part. These sorts of things are not intelligibly discussed in Australia. Always it is the vested interest that seems to gain the day. I think the accounting profession in Australia has been very slow to decide any accepted standards about the so-called accounting for inflation. There is certainly no degree of unanimity among members of the accounting profession or among the various firms. The attitude differs from firm to firm according to the nature of the business that is transacted. We all tend to get caught up and say that we have to adopt the Mathews report even though it had reservations and made some distinctions between financial and nonfinancial companies and so on.

I have been in this House a pretty long time. I had to bear the burden of handling income tax Bills for the Opposition for a long time. Income tax is the singly most important tax in the tax collection field. Looking at the overall situation this financial year we will get nearly $9 billion from pay-as-you-earn taxation, $2V4 billion from other taxation- that is from provisional and other tax payers- and near enough to $3 billion from company taxation. We are dealing with a total collection of more than $14 billion. The whole substance of this is disposed in the House annually by a couple of hours of debate. Most of tonight s debate has been beclouded by the virtue the Government has ascribed to itself for the great job it is doing for the mining industry. A great job has been done for the mining industry but if I may say so I think it has been done at the expense of the rest of the people of the Australian community. It is fair enough to give justice to the mining community; but who can say that these measures are justice? In my view they are extended benevolence. Had the devaluation come earlier the Government might not have been so disposed to give the taxation concessions that have now been given. The Government has backed both horses and both have come home as winners in somewhat different races. It is a very heavy penalty for the rest of the Australian community to pay.

I am sorry in some ways that the time left for me to speak is so short and that the time of night is so late. The sad thing from counting the heads at the moment, is that far more officials are listening to what is being said than there are members in the chamber taking part in what is being done. I do not underestimate the importance now and in the future to Australia of the mining industry, but I certainly do not believe that the tax system is the best way to look at that sort of problem.

Let me take a moment or two to refer to this curious thing called the interest equalisation scheme. I thought the drought bonds were silly enough. I did my best to abolish them, but I found some resistence even from my own side. That scheme has been abolished but in its place is something that in my view is quite inequitable. We are told that the total accumulated deductions at any one time allowable to a deposit will be subject to an upper limit of $100,000. What sort of system is it that we are talking about? I do not deny that farmers are in a desperate plight. Does the Government think that because farmers have been in a desperate plight for some time they will now suddenly say 'thank you' because taxes will be eased on income that no doubt they would be using to liquidate their debts? Does the Government think that farmers will be able to pay amounts of up to $100,000 into some sort of fund and have that money taxed on a different basis? I wish the Government would find out how many would receive the benefit and how many would be excluded when it takes the realities of the parameters of such a scheme into account.

Mr Corbett - Ask the organisations and you will find out.

Mr CREAN -Who do the organisations represent? I wish the organisations would look at the totality of the producers. It is easy to get on the bandwagon and become the great advocate for something that is regarded as a panacea and which potentially is hardly available to anybody but miraculously is available to one or two. I regard this sort of scheme in that sort of context. The aspiration was good but the anatomy was not subject to enough analysis. I hope that the scheme will be looked at in that sort of aspect.

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