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Thursday, 7 June 1984
Page: 2759

Senator COOK —Has the Minister for Resources and Energy seen the article in last Saturday's Age newspaper by that paper's business editor, Mr Terry McCrann, headlined 'Walsh's RRT will tax phantom profits'. If so, has the Minister noted the pompous and paternalistic criticism of the Minister's views of the resource rent tax? In view of Mr McCrann's analysis, has the Minister modified his approach on this issue?

Senator Chaney —Point of order, Mr President. My recollection is that Senator Walsh has already answered this question and has put an article in the Age answering it. This is becoming rather repetitious.

The PRESIDENT —Order! Senator Cook is entitled to ask a question and the Minister is entitled to respond.

Senator WALSH —Not everybody reads the Age. Although I normally read it fairly diligently, I was not aware until about an hour ago that a letter I had sent to the Age had been published on Tuesday. So even some of those who read the Age fairly diligently missed it. Yes, I have seen the article.

Senator Chaney —Funny, I saw it.

Senator WALSH —The honourable senator has more time than I do these days. The first part of the article made some comments approving of me and some of my actions. I do not know whether I should be pleased or worried about that. I noted that Mr McCrann, though querying the rates which had been proposed, approved in principle that tax, which puts him light years ahead of resource tax dilettantes like Senator Chaney.

That section of the McCrann article was based on an argument which was used by some sections of the industry. That argument was answered at the industry meeting on 18 May, although that fact was apparently not known to Mr McCrann. In simple terms, the industry argument assumed that both rent tax and corporate tax would be paid on all net revenue.

So far as corporate tax is concerned that assumption would be correct if all funds invested were equity capital funds. Of course, as anyone who knows anything about the industry realises, the overwhelming majority of funds which are invested, especially at the developmental stage, is either borrowed funds upon which the interest paid is deductible for corporate tax purposes or alternatively, retained earnings upon which corporate tax would have been paid had those retained earnings not been invested.

The second point overlooked was that no rent tax will be applied at all until the investment compounded in all but an insignificant number of cases at the threshold rate has been repaid. Another point overlooked in that article was that even after total investment compounded at the threshold rate has been repaid from earnings, there will be, almost certainly in all cases, further earnings which will return dividends to the original equity capital holders.