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Tuesday, 12 June 1984
Page: 2797

Senator CHANEY —My question is addressed to the Minister for Resources and Energy. I preface the question by saying that the Minister is having discussions with industry on the details of the proposed resource rent tax, although the details of those discussions are confidential. Will the Minister give a much- needed assurance that he proposes to reconsider the details of the fundamental elements of the resource rent tax, such as tax rate, threshold rate, and end of life adjustment? Does the Minister now accept that the details of the resource rent tax, as outlined in the Government's April paper, give rise to a real risk of diminished offshore exploration?

Senator WALSH —I have told the industry that its views will be taken to Cabinet, although it should be noted that there is no such thing as a monolithic industry view. There is considerable divergence of opinion within the industry on the effects of particular tax rates on exploration activity, and on a number of other details of the tax. I have nothing to add to that at this stage. A submission is being prepared. I should like it to be considered by Cabinet next week, but it may be the week after next before it is considered.

Senator CHANEY —I ask a supplementary question, Mr President. The Minister did not address that part of my question about whether he now accepts the details of the resource rent tax as outlined in the Government's April paper, that is, his paper of April, which gave a proposed rate for the tax and a proposed threshold for it and did not contain details of what would happen about end of life adjustments, give rise to a real risk of diminished offshore exploration.

Senator WALSH —There are many factors which affect the level of exploration activity. For example, the Australian Petroleum Exploration Association had forecast at the end of January last year that there would be a decline of, I think, 75 per cent in seismic activity, and a decline-I should not like to be held to this figure because I am quoting from memory-of about 30 per cent in total exploration activity, before the Federal election was announced or before the prospect of the application of a resource rent tax was seriously considered. Those forecast declines did not take place, which emphasises that there are many factors affecting the level of exploration.

Whether any particular tax rate will affect the level of exploration is a matter of judgment. As I indicated in my previous answer, the judgments made by different companies involved in the industries have varied on that question. What it finally hinges on, I think, are two major factors: The degree to which the abolition of the existing ad valorem royalty or the rate of rent tax is comparable, and seen to be comparable to that; and secondly, the degree to which companies which were exploring have always-I stress this-believed that, if highly profitable large oilfields were discovered offshore, any government would have made some changes to the taxation system. This Government's view is that it is better to establish the rules before that happens than to react in an ad hoc and arbitrary way after it happens.