Steve Irons (Swan, Liberal Party) Share this | Hansard source

I rise to speak on the Minerals Resource Rent Tax Bill 2011. I, like the Deputy Leader of the Liberal Party, the member for Curtin—who spoke here before—am a proud West Australian and see that this tax will affect my home state more than it will affect any of the other states. It was clear from the results of the 2010 election in Western Australia that this mining tax and the carbon tax were overwhelmingly rejected by the West Australian population.

I started my career as an apprentice electrician and eventually ran a small business, which is how I earned my living before entering parliament. Unlike many on the other side of the House who had careers working for the trade union movement before entering this place, I know what it is like to run a business and to have to deal with burdensome taxes and government regulations. I know how prohibitive to running a successful business those taxes and regulations can become. That is why I always take great caution when it comes to these sorts of bills and look at why new taxes are being introduced. If this great country of ours is to stay strong and if our industries are to create wealth and provide jobs to Australians, we need to be creating and maintaining economic conditions for those industries to prosper. To maintain strong economic conditions we need investment, and those investors need a return on investment. This bill will suffocate investment, as it will be suffocating return on investment. It is as simple as that. We just heard the member for Moreton talk about what they are doing for small business, but this is just the misunderstanding of the Labor Party—they just don't get business and they just don't get taxes. As an example, he said they were going to reduce small business tax from 30 per cent to 29 per cent, a total of one per cent. The only small business that will benefit from that at all is the small business that is making a profit; if it is not making a profit this will be of no help at all. The other example is that they have just increased the superannuation levy, which wipes out the one per cent straightaway. If a small business man is making a profit, he will get an extra dollar for every $100 that he makes in profit. Big deal. That is no assistance to small business at all. But the Labor Party people think that it is a great bonus for small businesses.

To maintain strong economic conditions, we need investment, and investors need a return on investment. This bill will not maintain strong economic conditions; it will do exactly the opposite. The flawed process with which those opposite announced this mining tax to the public remains one of the most embarrassing performances of the government's time in office. It led to chaos across the country, which led to the ending of the prime ministership of the member for Griffith by the current Prime Minister and left an industry with an uncertain future.

No consultation was done with any stakeholders when the initial mining tax was announced. There was no consultation with industry or with state or territory governments despite serious implications for their own-source revenue. The Henry recommendation that a national profit based resource rent tax should replace state and territory royalties and that the federal government should negotiate the federal-state implications of such a move has been ignored by the federal government. The government's decision to provide no consultation on the implications of the mining tax is worrisome, given that resource royalties are 20 per cent of Western Australian state government revenues, nine per cent of Queensland state government revenues and six per cent of Northern Territory government revenues—and despite major implications for GST sharing arrangements around Australia.

This bill will damage Australia's ability to attract foreign investment. The increased sovereign risk brought on by the retrospective nature of the tax, and the large rise in taxation in comparison to overseas investment destinations, will no doubt cause foreign investors to think twice before entering the Australian market. The mineral resource rent tax is divisive. The government has created a situation where we have three big miners—and the rest. It is turning different parts of the industry and the economy against each other.

The WA state Treasurer, Christian Porter, has informed the government that 65 per cent of the revenue will come from iron ore production in Western Australia alone. It is extraordinary that one new national tax would raise 65 per cent of its revenue from one single state economy. This is about $25 billion coming from WA, out of the $38.5 billion total predicted revenue over the next decade.

This tax is deeply unpopular within my electorate of Swan, and obviously all of Western Australia, judging by the 2010 election results. I see the member for Hasluck in the chamber, and I am sure it is just as unpopular in his electorate. That is why it is disturbing that the federal government is trying to link infrastructure projects that would normally be funded out of consolidated revenue to the passage of the mining tax. The government is trying to hold a gun to the head of the Australian people, saying: support this tax, or else.

Of course, the government has shamelessly tried to use this strategy in my own electorate of Swan, when prior to the last election the government tried to link the future of the mining tax with the Gateway WA project for the roads around Perth. This was a very poor strategy. The government said to the people of Swan, many of whose livelihoods depend on the mining sector, 'Your roads are not going to be upgraded by the government unless you support the world's biggest mining tax, which will impact on the economy, your livelihood and your future.' We in the coalition made it clear that we would be funding these road projects, including the airport roads upgrade and the Great Eastern Highway upgrade, without the mining tax. Gateway WA has been identified by the WA government as critical to relieving state transport bottlenecks. Local people in my electorate know only too well of these bottlenecks, which they have to face during their everyday activities on roads which they share with industrial traffic coming to and from Kewdale and the transport hub in Welshpool. That is why on behalf of the community I campaigned hard for the upgrade of the Great Eastern Highway, which I am pleased to say is now underway, after some worrying times, including when there were concerns about the federal government not meeting a shortfall, which would have seen the upgrade cease at Hardey Road.

Gateway WA is a very important project. The federal contribution to the $600 million project is $480 million. The future of such a project should not be linked to what the Premier of Western Australia has described as a tax on WA. The project should also not have been thrown into the realms of uncertainty as it has been by the government's shaky and unreliable negotiations with the Independents. Today in the Australian we saw a big spread on how the member for New England plans to 'hold a gun to the government's head' on the mining tax legislation over issues in his electorate. The message coming out of Canberra is chaotic and the result may well be delays in this project.

We know the real reason why the federal government is introducing this mining tax legislation: it cannot fund any more of the nation's vital infrastructure projects through usual channels because of the massive national debt it has built up. It was interesting to hear the member for Moreton talking about a figure of $94 billion—it just rolled off his tongue. That is close to the national debt that the government has now built up. Kevin Rudd told all Australians he was an economic conservative but misled the Australian people. This country has never in its history been in more debt than it is now. The government cannot meet its obligations to the Australian people to continue to invest in infrastructure, and that is why it has to introduce this mining tax.

If the mining industry is threatened, so will be Western Australia and also the nation. That is why this was such a serious issue in WA before the last election, not only because of a threat to the jobs of the many people who work directly or indirectly in the mining sector but because the people of Western Australia understand the threat to the health of the local and national economy. There are many fly in, fly out workers in Perth and I know that the House of Representatives Standing Committee on Regional Australia is conducting an inquiry into fly in, fly out work practices at the moment, which I know do place strain on many families across WA. It might also be worth consulting with these workers over this legislation and how they feel it will affect them.

It is well known that Western Australia's GST intake is the lowest in the country, at 68c in the dollar. However, projections from the WA government suggest this could reduce to 50c within three years and be on its way down to the 30c mark. Given this, the Premier's recent decision on iron ore royalties was understandable. With no guarantee of WA's future GST return, the Premier was forced to act to secure some royalties. However the impact of this decision on the federal government's budget shows how the mish-mash deal hammered out before the election by the government with only three of the mining companies was just a short-term political fix. Under this deal the government promised to underwrite any rises in state royalties. State governments in Western Australia, New South Wales, South Australia and Tasmania have increased royalties on iron ore and coal, and the result has been a massive hit on the federal budget bottom line.

I heard members on the other side of the chamber complaining about this, but that was the deal the government set up. It was their deal, so they have nothing to complain about. Other states such as Queensland have reserved the right to raise royalties in the future. None of the states were party to the Prime Minister's pre-election quick political deal and now the government is paying the price. As the shadow Treasurer said in his contribution, you cannot have serious and genuine reform of resource taxation and royalty arrangements without active and constructive engagement between the Commonwealth and state or territory governments.

Perhaps most significantly, there are serious question marks over the constitutional validity of the mining tax. We know that Ken Henry said that the federal government never sought advice on the constitutional validity of the tax before its announcement, and there is now the prospect that this legislation may not be lawful under the existing Constitution. As a tax on a resource at the point of extraction, this could constitute a tax on state property as prohibited by section 114 of the Constitution. Following the Malaysia people-swap decision from the High Court, the government is once again introducing legislation that one would think will inevitably result in a High Court challenge.

I would also say that, based on the outcome of the last election, it is particularly unclear whether the parliament has a mandate to introduce this legislation. I will be listening carefully to the speeches from the Independent members but, as I have already mentioned, the member for New England has announced that he will not support the legislation in its current form. Should these Independents have changed their minds since the last election campaign, it would indeed be another sad day for democracy if this legislation is passed in the House—following on from the carbon tax legislation, which only one or two members out of the 150 went to the last election in support of.

The government should start from scratch and pursue genuine tax reform to give Australians lower, fairer and simpler taxes through an open and transparent process. The parliament should stop the MRRT from going ahead and force the government to start again. The Gillard government needs to get its spending under control so it can focus on delivering lower, simpler, fairer taxes and genuine tax reform based on a proper process that gives everyone a fair opportunity to have their say. Instead of doing this, another 287 pages of tax law will now be added, increasing complexity and compliance costs.

It is concerning that the big three miners have been able to gain benefits for themselves that smaller miners do not have access to. For example, the introduction of a market valuation system to calculate applicable deductions gives the big three miners a significant tax shield that the smaller and mid-tier miners cannot access. Smaller companies will suffer under increased compliance burdens. The Henry tax review recommended a lower tax burden for smaller mining ventures, to help start-ups grow and prosper and to keep mining ventures in their decline phase alive longer. Instead, smaller and mid-tier mining ventures will pay a higher effective tax rate under the Gillard MRRT than the big three who were given exclusive access to the negotiations with the government.

One of the most concerning outcomes of this legislation is that it will worsen our structural deficit. The MRRT will help the government create the illusion of an early surplus in 2012-13 but it will leave the budget worse off from 2013-14 onwards. Treasury projections of MRRT revenue to 2020, released under FOI, indicate that Treasury expects revenue to reduce over time. The revenue not only will be downward trending but also will be volatile. Over the first year since the MRRT was announced revenue estimates fluctuated from between $7.7 billion to $24 billion.

While the revenue will diminish, the cost of the measures the government has attached to the MRRT will continue to grow strongly. For example, the cost of the proposed increase in compulsory super to 12 per cent is expected to rise to $3.6 billion in 2019-20, which is when it would be fully implemented. That same year, Treasury projections show MRRT revenue at $3 billion. The Senate inquiry into the mining tax has conservatively estimated that over the next decade the net cost to the budget will be $20 billion.

The MRRT remains a tax based on a deal negotiated exclusively with the three biggest miners who were given privileged access. Instead of making our tax system simpler and fairer, as we were promised, Labor's mining tax will make it less fair and more complex. This tax is divisive to the country, it distorts the national economy and it diminishes our international competitiveness. It is another example of a bad government getting worse. I will not vote for a bill that will reduce the standard of living for Western Australians and drive investment offshore to other countries that are now offering our miners incentives not taxes.

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