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Thursday, 2 November 1967

Mr CONNOR (Cunningham) - It needs to be stressed in debating this clause and the question of royalties that a surprising amount of information has been available to oil companies from the Bureau of Mineral Resources. The Bureau has done a fantastic job in this regard. One of the matters that has caused amazement to these overseas companies is the ready availability of this information which would be treasured and made available only with very great discretion in their native lands. That was the initial advantage that the oil search companies in Australia had. In addition to that, no reference has been made to the tax concessions which are made on expenditure in oil search and on calls in respect of shares in oil search companies. Today there is a process generally known as tax minimising. Oil companies are international organisations. They are incestuous in their relations with one another. They are quite unscrupulous when it comes to really developing an area and particularly in shuffling around their assets from one company to another.

On the question of depreciation allowances alone we have yet to learn what deal, if any, has been made with the Commissioner of Taxation. As the Minister for National Development (Mr Fairbairn) pointed out, the Government is groping its way in this regard. Offshore drilling, according to the Minister, is something quite new in Australia. Excessive depreciation allowances undoubtedly will be claimed. That matter also will be litigated if necessary. Let us take one of the major forms of tax minimising which undoubtedy will occur. That will concern the use of the oil drilling rigs. The common practice is for an American principal company, in dealing with its Australian subsidiary, to make charges for licence fees and the use of equipment over which it has patent rights or not even patent rights but a particular technique that could be applied in the search for oil. What is the position in cases such as this? If we accepted the words of the Minister full company tax would be paid on every gallon of crude oil produced and on every cubic foot of natural gas supplied. But there will be nothing of the sort. Some qf- the best accountancy brains in the world will be available and will be used by the companies to minimise taxation payments to the utmost. .

Need I remind the Minister that in another field, in the case of some iron ore companies, quite a bit of fiddling is going on with regard to the prices being charged? Need I remind the House of the protracted litigation between the Commissioner of Taxation and the Shell Company of Australia Limited? Need I remind the Minister of the various reports and investigations of the Tariff Board and various committees of inquiry and the extreme difficulty in establishing the landed price of crude oil in Australia? What a lovely racket has gone on in that connection over the years. A company operating in the Persian Gulf, owned by an American principal of course, sells oil at a suitable, inflated price to an Australian company. In that way the profit on the ultimate price of the petrol and other derivatives, when extracted, is minimised. Does the Minister say that people of this type will not be out to diddle this Government for everything they can? They will, to begin with.

Again the Minister has failed to give an answer as to the percentage of foreign capital invested in the companies that hold these permits and production licences. He has not stated the percentage, and obviously he does not intend to do so. How is the value of production to be determined? In that regard it is very interesting to read clause 9 of the associated Bill on royalties, the Petroleum (Submerged Lands) (Royalty) Bill. That clause is worth quoting. It reads:

For the purposes of this Act, the value at the well-head of any petroleum is such amount as is agreed between the permittee or licensee and the Designated Authority-

A gentleman's agreement - or, in default of agreement within such period as the Designated Authority allows, is such amount as is determined by the Designated Authority as being that value.

What criteria is the designated authority intending to apply? Will it be the present landed cost of crude oil in Australia?

Mr Buchanan - No.

Mr CONNOR - I doubt it too. It will be a lower figure. What is to be the calculated price of natural gas supplied? Let the Minister inform us on that if he can. Australia is 'being asked to sign a blank cheque for the whole of this legislation. The royalty charges that are to be imposed are too low.

They are utterly unreasonable. The Government is bending over backwards. It is overimpressed by major monopolies. An old adage is that the English dearly love a lord. This Government dearly loves overseas oil monopolies. It is starry eyed about them and bends over backwards to act as a sycophant. They respect' one thing only. That is strength and the ability of a national government to act in the name of the people and to extract the maximum that it can from them. That will not be done under the terms of this legislation.

Let us take the example of the oil now being produced at Barrow Island. Already shipments of it have gone to Singapore. What is the benefit of that to Australia? The oil is refined in Singapore and then sent elsewhere. It is true that a production royalty will be payable. But in broad terms what benefit will flow to the Australian economy? The benefit will be minimal. In some cases, I have no doubt, crude oil, when shipped, will go abroad. It is true, in the case of Victoria, that oil will be refined in the mainland refinery. In the case of the smaller States the oil may be shipped abroad. The Government is unsophisticated, slovenly and inept; it has not taken proper and adequate steps to protect the best interests of the Australian economy and the Australian community. Ninety per cent of the ultimate profit from Australian oil and gas will go overseas. That is something that' goes to the eternal discredit of the Government.

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