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Wednesday, 25 March 1987
Page: 1524

Mr BRAITHWAITE(6.46) —It is significant that these major amendments to the Petroleum Resource Rent Tax Assessment Bill-and I say `major' because there are 36 amendments in all and because the Minister for Community Services and Minister Assisting the Treasurer (Mr Hurford) has indicated that they are major-should have been submitted. This speaks volumes about the Government's rush to pass this legislation, not having had the consultations it should have had with the industry in the first place to try to come to some accommodation. Even now, I understand, these amendments have not been fully considered by the industry. The industry has not had a chance to examine them or comment, yet here we are in the Committee stage considering what I say are major amendments.

We have already indicated our complete opposition to the four Bills-and obviously that goes for any amendments to them-but I think it appropriate that we make some comment on them. During debate on this Bill I interjected on one Government member and asked about some of the costs which should be related to it but which were not then included in it-knowing that they were included in the amendments. The honourable member in question had no idea whatsoever of the implications of what I was talking about, particularly the aspect of bad debts. I can understand the Government trying to make more certain the aspect of revenue-when it is to be received and when it is to be taxed. In that regard the Government has now found that the Bill is deficient in determining this as it would like and has now included bad debts as an allowable deduction.

If the Government comes to the point of praising the forward deductions, as has been indicated in the Bills, why does it still walk away from the deduction that major exploration and development companies incur on dry wells? I was advised-I think I have got the words right-that in areas of low prospectivity it is likely that nine out of ten wells, when drilled, will be dry and that only one in five or six of those wells have any chance of viability. So the chances of getting a viable well are about one in 50 or one in 60, yet this legislation will deny prospecting companies this major deduction. Even as recently as yesterday the Minister for Resources and Energy (Senator Gareth Evans) was saying that the Government had given this matter further consideration, that in the long term it was a difficult area, and that it came down on the side of not allowing the deduction; whereas what we have been talking about in regard to this Bill is that deductions should be allowed. It is not good enough for the Government to say that it has changed from a production method to a profit method when the profit will be exaggerated and high in comparison to the actual returns to the company because of this low prospectivity.

What is being done within these amendments highlights the points we were trying to make right along the line: With no incentive to get out and drill the wells, we are going to see development drop off; and that will be a result of this Bill. The Minister for Resources and Energy was hinting at a higher resource rent tax even when he addressed the Australian Petroleum Exploration Association conference on the Gold Coast. He said, amongst other things, that the Government recognised that the industry was seeking major revision of existing secondary taxation structures and that it now faced an escalation of unpalatable resource rent initiatives as a focus of the new Federal policy. I know that, under the resource 2000 program, APEA submitted two particular reviews-I think in four parts-on the whole taxation question. Obviously it found no joy in the original legislation or in what is happening now.

Senator Evans has also indicated that there could be an expansion of the targeting policy as incorporated in the resource rent tax legislation. This has come at a time when the legislation has not even been put to bed and passed. According to the Minister, what the Government has done clearly indicates that there has been very little co-operation or consultation with the industry. It has blindly gone ahead on the basis that it expects to drag more tax out of the industry than it has before. After listening to the speech by the Minister for Immigration and Ethnic Affairs just now, I hope that the Government will initiate discussions with the States on the question of the treatment of projects which straddle resource rent tax areas and State excise royalty areas. I wish the Government the very best of luck as the Premiers go towards the conference at which the Treasurer (Mr Keating) has threatened to bring down the ceilings on borrowings and make major cuts in grants that go from the Commonwealth to the States. So in that climate I think it is wishful thinking to put that within the speech that was just made.

We made the comment earlier that this legislation-36 amendments have been added to some 63 pages-will make it difficult for the companies to determine where their liability will lie as far as tax is concerned. I emphasise that before the amendments were moved, the Government did not even know. It had to introduce these amendments in order to put the frills in certain areas. There will be a major area of uncertainty brought about by these amendments.

I was very interested in a comment that was made by two chartered accountants from Sydney who suggested to members of the Opposition that perhaps we should not be looking at reversing some of the other aspects of taxation that the Government has brought in, such as the fringe benefits tax and the capital gains tax, on the basis that these taxes have found acceptance within the community. The Minister for Immigration and Ethnic Affairs, who is at the table, and the two chartered accountants in Sydney must have their proverbial heads in the sand. They must not move outside in the richer area. I make no reflection on the Minister's previous role as a chartered accountant, but I know that there is a rich harvest in these taxation Bills that have been introduced as tax reform measures for some particular professional services. I cannot help feel that perhaps the accountants made those comments without realising-although they talked about certainty within the Bill-the destabilising nature that these taxes will have on the people who have to pay them. The fringe benefits tax is destabilising. This industry will be paying it along with others. The capital gains tax will be destabilising. The resource rent tax is another destabilising factor. I suggest that people who make those comments, particularly those who have been rewarded by the legislation in the form of services and fees rendered and collected from it, should have a better understanding of what will happen in the field when this legislation comes about. I know that the fringe benefits tax has caused some unemployment within the industry. It is another cost and it will in the long term, far from bringing certainty, be destabilising.

To those who feel that tax reform means that the industry has to persevere with fringe benefits tax, capital gains tax, superannuation tax, entertainment tax, and now this resource rent tax I say that if they think that the Opposition will accept this in government they have another think coming. As has been indicated in the past, there is every intention that the fringe benefits tax, and the capital gains tax particularly, will be repealed. We do not agree with this legislation. We cannot agree with the amendments that have been introduced in haste and in great number. They have been introduced without consultation, and the Opposition opposes these measures along with the others. We suggest that the Minister in charge of this resource rent tax get in touch with the industry, talk to it and see what might be better provided in the form of usable amendments. Again, I refer to the point on deductibility for dry wells. The Minister at the table might be able to give me some explanation of why this matter should not have been dealt with in the form of an amendment during this Committee state.

Mr DEPUTY CHAIRMAN (Mr Drummond) —Order! The honourable member's time has expired.