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Thursday, 2 November 1967


Mr LUCHETTI (Macquarie) - I support the amendment moved by the honourable member for Cunningham (Mr Connor). For the purpose of considering what is a just royalty it is very important to take into consideration factors other than those that have been referred to in the Committee up to this stage. These include subsidy given by the taxpayers of Australia, taxation concessions, areas of lease, the measure of monopoly afforded to the companies, the price that the consumers will be obliged to pay for the products and - another important matter - the measure of co-operation given to these companies by the Bureau of Mineral Resources. I would like to pay tribute to the Bureau for its outstanding service in the development of our petroleum industry.

It must be remembered that Australia has been more than generous in these matters. These are not only my words, of course. These words are supported by statements made by the Prime Minister (Mr Harold Holt), the Treasurer (Mr McMahon) and the Minister for National Develpment (Mr Fairbairn). On many occasions these gentlemen, representing the Government, have expressed the view that the oil companies have been extremely well treated. These expressions are found in documents issued in their names. Numerous similar statements have been made and I will refer but to a few of them. These statements speak for themselves.

We have been discussing the question of taxation and how it affects this legislation. In a statement issued on 27th January of this year dealing with the question of royalty, the Treasurer referred to the vanous aspects of assistance given by the Commonwealth Government. He also referred to the claims of the oil companies that the take' was in excess of what it should be and that it was greater than in certain other countries. I make these comments in reply to statements made earlier by the Minister and the Attorney-General (Mr Bowen) in particular. The Treasurer said:

In the case of the tax figures included in the calculation of the quoted Australian percentage, on the other hand, there seems no doubt that the. figures are substantially overstated. This is because the figures take no account of the special deductions allowable under our income tax 'aw which are designed to free the proceeds from the sale of petroleum and its products from' income tax until all allowable capital expenditure has been fully recouped.

That, indeed, is a substantial contribution. Nor can it be divorced from the question of what royalties should be paid. This was one of the compelling arguments used by the Treasurer. Reply to the claims of the oil industry at the beginning of this year, he said:

Although it is evident that the taxation figures included in the calculations operate to overstate, and probably seriously to overstate, tce relative weight of Australian income tax, it would bc a pointless exercise to attempt a thorough-going comparison. ...

At a later stage he said:

So far as Australia is concerned, the important point is that oil and gas producers (as well as other producers of mining products) are favourably treated, as compared with other types of taxpaying industrial enterprises, by reason of the special taxation deductions to which I have referred. . . .

So the Treasurer, speaking on behalf of the Government, expressed the view that the companies are very well treated indeed. He continued:

The only comparison that can be made of any real meaning is between rates of royalty.

Later on he said:

For instance, the Commonwealth Government has given special stimulus and assistance to oil search, this assistance being given at times when the risks are highest.

He pointed out that $59.6m had already been made available to these companies. Furthermore, he said the importance of the matter was emphasised by this amount. He went on:

The standard royalty rate of 10% in the proposed joint offshore legislation-

These are the words of the Treasurer and they ought to be heeded - is relatively low on international standards. For instance, it compares with rates of 16}% and 12i% generally applicable in offshore areas in the United States and the United Kingdom respectively. The rate of 10% is even more favourable when regard is had to the generous treatment, relative to other countries, afforded under th: proposed legislation in the matter of sizes of exploration and production areas.

These are the words of the Treasurer. Surely they cannot be cast to one side. Furthermore, the Minister for National Development has made it clear that the Commonwealth Government has been generous in this matter.

I asked the Minister a question on notice in regard to a number of matters concerning the payment of royalty. In his answer, the Minister said:

Royalty is the payment made by the concessionaire . . . imposed in many forms; the payment may be made as a percentage of the profits . . .

In his answer the Minister has set out the amounts of royalty paid by various countries. For example, the rate for the Netherlands is 16% and for Iran it is I2i%. These are indicative of the amounts paid. In the Neutral Zone, Middle East, there is a royalty rate of 20% and in the United States of America it is 12.5%. This confirms the Treasurer's statement. As to incentives given in other countries, in his reply to me the Minister for National Development said:

There are very few instances of cash incentives ro companies searching for petroleum. Actually, the position is the reverse in the so-called oil exporting countries and, in general, the companies have to come up with more and more attractive proposals to obtain the rights from Governments to search for and develop petroleum reserves, particularly in the Middle East and North Africa.

Therefore, it is not a question of governments giving incentives to oil companies; it is a question of oil companies coming along and offering a premium for the right to search for oil. Of course, these facts are overlooked by the Minister who has a very convenient and short memory in this when he fails to remember. Further on in his answer to me, the Minister for National Development said: lt is my understanding that the only Governments who have been providing direct financial assistance to companies in the search for petroleum are the Australian and South African Governments.

I put it to the Committee that we have been generous to oil companies and that they in turn have a responsibility to pay to the taxpayers a reasonable sum for their rights to exploit the Australian market. We should examine the interests involved in this legislation. I specifically refer to the offshore search in Bass Strait. In a statement of drilling operations and subsidies paid for geophysical search I- find that Esso had a subsidy limit of $297,055 and during 1965-66 a subsidy payment of $108,000 was made. Again in regard to geophysical operations I find that Esso had $1,017,934 as a subsidy limit in 1966 and for offshore geophysical work this company was entitled to $366,743. Surely the companies that have been treated so generously by the Australian taxpayers in turn ought to pay something back to the Australian taxpayers and the people of this nation in keeping with what they have already received in helping them to promote the very successful search for oil.







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