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Thursday, 30 April 1987
Page: 2075

Senator DURACK —Is the Minister for Resources and Energy aware that at an Australian Institute of Mining and Metallurgy seminar in Canberra yesterday the General-Manager for Exploration at Broken Hill Proprietary Co. Ltd, Mr Bryan Griffith, expressed deep concern about the impact of the Government's resource rent tax on the off-shore exploration industry? I ask whether the Minister is aware that Mr Griffith said:

Certainly BHP will now seriously reconsider its attitude to higher risk ventures in the Australian off-shore, given the increasingly stringent criteria controlling exploration investment. The leakage of BHP funds overseas could well increase as a consequence.

I ask the Minister: In view of these very serious statements by one of Australia's major off-shore explorers for petroleum, will the Government reconsider its attitude to this tax, particularly in regard to the deductibility of exploration expenses?

Senator GARETH EVANS —I am always a little amused by the fulminations of BHP, in particular, on the subject of a resource rent tax as it is only as a result of this profit-based regime being introduced that it was possible for it to proceed with the Jabiru development off the north-west coast of Australia. The reality is that all expectations are that the --

Senator Chaney —That is a totally different issue.

Senator GARETH EVANS —It is not the case that it is a totally different issue. It is exceedingly relevant. The whole utility of a profit based tax is that it makes possible the development of fields which in many instances would otherwise be quite uneconomical. The only point about it is that it means that great dollops of cream cannot be scooped off from the big bonanza windfall projects, which resource companies have regarded as their right to collect, notwithstanding that they whinge their heads off in times of low prices and low profitability and demand the reduction of production based taxes as a result.

I am not impressed by the sorts of arguments that I hear from Mr Griffith or anybody else on this subject. We will be debating the resource rent tax legislation-as a result, it is quite out of order for me to be referring to it, let alone for questions to be asked about it-early next month and I will then put the Government's position in detail.

On the particular question that Senator Durack asks me about roping in wider deductibility for exploration activity in the existing regime, let me say this: The Government has given very close consideration to a proposal to allow exploration expenditure anywhere within the area covered by the RRT to be deductible against it. The principal argument in favour of it is the boost that may be given to exploration should such a change of policy be made. I am familiar with those arguments. I understand them very well. Wider deductibility was, however, discussed when the RRT policy was formulated in consultation with industry from 1983 to 1985, and my predecessor Senator Walsh and Mr Keating were very actively involved in those negotiations. A variety of options was proposed, but industry preferred a narrower scope for exploration deductions in return for the relatively generous threshold rate and the low substantive tax rates which now apply.

In confirming current policy the Government was concerned to ensure the absolute certainty and stability of the new regime. Major investment arrangements, including in particular the Jabiru 1, have already been made in reliance on the existing announced RRT ground rules. We believe that it is in everyone's interest that the rules are not subject to change with changing circumstances. The trade off for stability and predictability on the threshold and the tax rates, which the companies yell and scream for, is stability and predictability elsewhere. That is the essential basis for the decision which the Government has made, and that is why we will not be changing it.