Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Western and Northern Australia) Share this | Hansard source

The leader of the miners’ campaign, Clive Palmer, has talked about this tax producing a 70 per cent burden on business. Clive Palmer has talked erroneously of the impact of this tax on business and he has been prepared, on many occasions, to fund the opposition’s campaign to argue that case. This blatantly false and unsubstantiated claim has been published and re-published. The truth is that the RSPT is not a tax imposed on top of royalties. It is not a tax imposed on top of company tax. It will effectively replace royalties by providing firms with a refundable tax credit for royalties. Where royalty payments are higher than the RSPT liability, firms will get a cash refund of the difference.

These important points are forgotten by so many of those on the opposite side of this debate. I think it is important to acknowledge the importance of this debate, and it is important that those participating in it become better informed. It was with sadness that I listened to James Pearson, the head of the CCI in Western Australia, on the radio last week making the same logical error as Clive Palmer has. The RSPT is deductible against company tax. Even some sophisticated commentators have talked about the theoretical maximum tax rate of 56.8 per cent, as if every project will pay that rate. It is also incorrect for a number of reasons. One reason the estimates are wrong is that they ignore that the RSPT taxes only superprofits, not all profits. That means effectively taxing internationally traded commodities that might generate superprofits, like iron ore—not taxing projects that mine gravel, clay or sand. If a project does not generate superprofits, it will not pay any RSPT and it will benefit from a company tax cut to 28 per cent and the government refund on the royalties that it pays.

I think it is important that we also acknowledge the important role that mining plays in our community and in our economy. In Western Australia, mining has built many regional centres. Unfortunately, frequently it does not pay the freight and the cost of supporting those regional centres. Early concessional royalty rates granted in the 1960s and the 1970s were granted on the assumption that mining companies would fund substantial infrastructure in remote and regional communities. As the 1970s progressed into the 1980s and as the economic rationalists took hold of these firms in the1990s, they stopped funding community infrastructure, but they hung on to the concessional royalty rates. So we see the situation in Western Australia that the concessional royalty rate of 3.75 per cent, which had been in place on projects since the 1960s, has now increased to 5.625 per cent, ensuring that companies do pay a better rate of return on the mines that they do have.

It is important to recognise this, because mining companies in my home state of Western Australia, in the Pilbara, do not pay local government rates. For 40 or 50 years they have paid concessional royalties but they have not paid local government rates. What this means is that the provision of local government type functions has had to be funded from elsewhere or not provided at all. So mining companies have quite happily established communities and they have quite happily sought tax deductions for the infrastructure that they have created, but they have not funded local communities through the payment of rates—taking the concessional royalty and not giving the infrastructure to their own communities.

The Pilbara Regional Council five years ago reflected on this practice by referring to it as a form of cost shifting to local governments and families in remote and regional communities, cost shifting from the large companies. The Pilbara Regional Council at that time made the observation that they genuinely felt that companies should either be subject to increased royalties or pay the freight and pay local government rates. This debate comes down to an important matter. It comes down to whether it is possible to structure a tax in a way that effectively taxes pure profit and does not impact on economic activity, and I believe this proposal does that. (Time expired)

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