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Monday, 23 March 1987
Page: 1328

Mr MARTIN(8.17) —I am almost tempted to offer the honourable member for Maranoa (Mr Ian Cameron) an extension of time to complete what he was saying. The Petroleum Resource Rent Tax Assessment Bill, the Petroleum Resource Rent Tax Bill, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill will give effect to the Government's decision to introduce a petroleum resource rent tax on profits from certain off-shore petroleum projects. A couple of things need to be said about that at the outset. Firstly, it relates to off-shore petroleum projects and secondly, it is a tax on profits. I will have a little more to say about each of those issues later on.

As we heard earlier in the debate on this group of Bills, petroleum resources are, in the most basic sense, community property. Accordingly, this Government believes that the community as a whole should share in the potentially high returns from the exploitation of these scarce, non-renewable resources. Contrary to what has been said by members on the other side, the legislation is not aimed at trying to stifle exploration, nor indeed to take away the incentive to derive profits in the petroleum industry; far from it. As we are aware, there are some real problems in the world market for petroleum products. As far as Australia is concerned, those problems have to be shared equally here. The Government recognises that the participants in petroleum projects who do not earn high profits in relation to the amount invested and the risk involved, particularly when oil prices decline, should be able to operate secure in the knowledge that excise and royalties that are based on production will not apply.

I come back to one of the first points I made. We are not concerned about a tax that is based on production, because the Government has come to believe that that is not an appropriate way to go with a resource such as petroleum. As I have indicated, that tends to stifle incentive and stifle exploration for the resource. The Government, therefore, firmly believes that this resource rent tax related to achieved profits is a far more efficient and equitable secondary taxation regime than the excise and royalty system that is the present system. I think it has to be emphasised-I do not know that it has been said in this debate to date-that the proposed tax actually replaces the existing system and is not an addition to it. That is a very important point and I am sure that there will be honourable members on both sides of this House who will probably agree that there are times when there is a need to continue an on-going review process of all taxation measures. Certainly this Government is committed to that process. With respect to petroleum we emphasise that the tax is not an addition to what already exists but rather replaces an existing system.

In contrast to a production based secondary tax regime this petroleum resource rent tax will be payable only in respect of projects earning a high rate of return on outlays. Therefore, those companies that are not earning this high rate of return will not be penalised. In fact, they will not be affected. How does it work and how did it come to be put into place? Unlike some governments around the world, as would be the circumstance if those on the other side were returned to power, this Government believes in discussing with those people affected in the industry many of the issues it plans to put into practice. Certainly this was the case in the petroleum industry when no fewer than three discussion papers were prepared and subsequently discussed with those participants in the oil industry. These three papers were: A paper released in December 1983 entitled `Discussion Paper on Resource Rent Tax in the Petroleum Sector'; a paper in February 1984 entitled `Effects on Exploration of RRT with Full Exploration Loss Offsets'; and finally a paper in April 1984 entitled `Outline of a ``Greenfields'' Resource Rent Tax in the Petroleum Sector'. As I have indicated, comments have been sought from those people in the petroleum industry and the result of that is the four Bills that are introduced tonight in this package.

In terms of the general application of the tax it is to apply to a person's taxable profits from the recovery of petroleum in off-shore areas where the Commonwealth's Petroleum (Submerged Lands) Act 1967 applies other than in those areas covered by production licences granted on or before 1 July 1984. That tax therefore, will not apply to the North West Shelf permit areas or Esso Australia Ltd and Broken Hill Proprietary Co. Ltd Bass Strait permit areas. Rather, excise and royalty arrangements will continue to apply in those areas. During the course of the debate this afternoon some of my colleagues on this side of the House, particularly the honourable member for Dobell (Mr Lee), made reference to the Bass Strait area. Some comments were also made from honourable members on the other side about that particular production. I believe that the honourable member for Maranoa also made some comment about whether or not this particular tax regime was going to stifle exploration in the Bass Strait. He made reference to the fact that those supplies are dwindling. It is a fact of life that the supplies of petroleum presently available from the Bass Strait are dwindling. (Quorum formed)

Madam Speaker, I was saying with respect to the general application of these particular Bills that the petroleum resource rent tax is profit based rather than production based and therefore will only apply when there is an excess of project related receipts for a financial year over both project related expenditure for the year and undeducted expenditure. This afternoon my colleague the honourable member for Dobell spent some considerable time discussing this point but interestingly some comments have been raised by Opposition members about the actual levels of petrol pricing. Just prior to my speaking on these Bills, the honourable member for Maranoa again raised this issue saying that there is discrimination against country purchases compared to the cities and so on. It is interesting to look at statistics because statistics are wonderful things when one is talking about all sorts of things. In respect of the average retail price of supergrade, if one extrapolates the statistics from December 1975-that would seem to be a good year to start with-who was in government at the time? That is right, it happened to be a Liberal-National Country Party coalition. The price of petrol in December 1975 was 15.6c per litre. It was not a great deal, but by March 1983-again a familiar time for us all because that is when that Government happened to go out-the price was 43.1c per litre.

Mr Price —How much?

Mr MARTIN —I cannot believe it either. In December 1975 it was 15.6c per litre and in March 1983 it was 43.1c per litre. If those mathematicians amongst us were able to calculate that immediately they would tell us that that is a 176 per cent increase. If one compares the last four years under the Fraser Government with the four years under the Hawke Government, again some very interesting statistics arise. In the last four years of the Fraser-Howard Government there was an increase in the price of petrol of 21.2c per litre, which was a 97 per cent increase. By comparison, between March 1983 and March 1986 when honourable members know who was returned to power-the Hawke Government, which had been running the country so effectively-there was only an 11.4c per litre increase, which is only a 26 per cent increase.

Mr Price —Twenty-six per cent compared to what?

Mr MARTIN —As the honourable member for Chifley rightly asks, it was a 26 per cent increase compared to a 97 per cent increase. Yet honourable members on the other side have the temerity to come in here and criticise this Government in terms of it adopting and continuing to stand by the import parity pricing policy which-who put it in; do not look at us-the Opposition put in and which we have retained. It is important, when considering the four Bills that are before us, to make a few comments about the import parity pricing policy, and some comments were made. The question was posed: Why, when there have been massive falls because of world oil price falls, have not the falls been passed on to the average Australian motorist? It is important for us to realise, in a sense of equity and fairness, that any government-irrespective of its political persuasion-would dearly love to be able to do that. However, the economic circumstances in Australia have been such that it has not been possible to pass on that fall and the value of that fall to the average Australian motorist.

I have indicated in this House on a number of occasions that if any government were faced with the economic circumstances that this Government has faced, and faced with the responsibility of having to provide services for average Australians, it should not be expected to take a massive decrease in the revenue that is redistributed to those who need it. I believe that that is a very firm and appropriate position that has been taken by the Government. As the Prime Minister (Mr Hawke) has often said in this place, it is one on which this Government will be judged by the majority of Australian people. I would point out that the principle contained in this series of Bills has been Australian Labor Party policy for quite a period.

Mr Lee —Since 1977.

Mr MARTIN —My colleague the honourable member for Dobell reminds me that it was first introduced into Labor Party policy in 1977. I will quote again from the speech he made this evening. As he rightly pointed out, a great deal of criticism has been levelled at the Labor Party for not invoking more parts of its platform, and there has been the suggestion that this was an area in which we should not get involved. Quite clearly, we have become involved in it. It is something that is not aimed, as the honourable member for Maranoa suggested, at taking away profits or trying to do something about profits. Rather, it looks at the whole question of equity. It in no way-because it is not production based; rather, it is profit based-takes away the incentive for oil exploration companies to go into an area, whether it be Bass Strait or anywhere in Australia, and continue this great tradition of looking for resources and more ably putting them to the benefit of the Australian people.

I conclude on this note: It is considered regrettable-that seems to be the word of the day-that the Opposition, I believe, has seen fit to oppose the four measures that have been introduced by the Government. I believe that, if we are fair dinkum in talking about the redevelopment of Australia, this is one way to go. As I have said, incentive will not be stifled. The ability of producers to look for new oil fields will not be stifled in any way. The expenses that the companies encounter along the way of exploration will be tax deductible. Therefore, to say that the Government is imposing yet another tax-the same old drone that we get from the Opposition-that it will be a disincentive to business in this country, is patently not true. I believe that this series of Bills will lead, again, to the development of a fairer and equitable situation regarding resources in Australia. I can only echo the sentiments of a former Minister for Minerals and Energy in this country, Rex Connor. I am pleased that his successor, the Minister for Housing and Construction (Mr West), is in the chamber this evening. Mr Connor's vision for Australia's resources, their development and the fact that the revenue derived from them is redistributed for other things in this country is coming to a realisation. This Government is committed to the Bills. It is timely to debate them today. The legislation will not take away incentive; it will not stifle exploration; and it will not point the finger at this Government and suggest that it is a high taxing government or anything else. Rather, once again, it will be a useful piece of legislation that this Government will, I am sure, on behalf of the Australian people, see come to great things. I commend the Bills to the House.

Debate interrupted.