Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice, Customs and Border Protection) Share this | Hansard source

I rise to talk on the minerals resource rent tax package of bills. This is a very bad tax. It has been very poorly conceived, it is fundamentally flawed and, as is the hallmark of this government, it has been completely hopelessly implemented. It is a tax that will be very bad for the country but will be particularly bad for my home state of Western Australia, which is going to provide the vast bulk of the revenue to the Commonwealth, if you believe the federal government's projections, which are relatively questionable. The Labor Party is seeking to impose on the industry a tax that is complex, unfair and fiscally irresponsible—and, worse than that, it is going to reduce our international competitiveness and has already flagged to international investors the idea of sovereign risk in Australia, something that was dead and buried under the previous government when business and companies investing overseas knew they could do so in a stable environment that was not subject to capricious government decisions.

The first thing I want to address is whether it is a good idea to tax the mining industry specifically. There has been a lot of talk about the idea of a mining tax. There is some support for it amongst the Australian population, but the whole idea of singling out a particular industry, particularly when the industry is clearly doing well under a terms of trade boom, for a specific tax measure is incredibly bad precedent for this parliament. It is an exceptionally bad idea that you can look around and see an industry doing well and say, 'We're going to target them for an extra tax beyond the taxes they already pay like every other Australian company'. It should send out warning signals to anyone doing business in Australia. It is as if, in the year 2000, we had seen that the IT industry was doing particularly well so we targeted a specific tax against them. It is incredibly bad policy, and the way that it has been designed makes that bad policy even worse.

The idea of taxing this specific industry is not clever. Mining companies already pay tax like everybody else in Australia; they pay a company tax rate. The argument that they are extracting resources that can only be extracted once is a reasonable argument, but it is already catered for in our taxation system by mining royalties. That is the tax that mining companies pay to state governments because they are the governments that these resources are vested in, according to the Constitution. That is the tax that mining companies pay to extract those resources. There has been a reasonable case to increase mining royalties in line with the fact that the industry is doing significantly well and that they were offered concessional rates for royalties when they started their companies, particularly in my home state of Western Australia. There was a reasonable case to rebalance mining royalties, and state governments in New South Wales and Western Australia particularly have gone ahead and done that.

That is right and proper because that is the way the Constitution was set up. Minerals are vested within the state governments. That is why, if this parliament does make the very bad decision to pass this tax, clearly we will find ourselves in the High Court, where the states will legitimately challenge the right of the Commonwealth parliament to tax resources that were vested in them when Federation was established.

We in the coalition recognise that the mining industry is crucial to maintaining our nation's economy. Mining companies do not have to invest in Australia because the resources are located here. Mining companies have a limited pool of capital and they will invest it where they see themselves getting the best return. They can easily invest it in a competing jurisdiction.

The Australian Association of Mining and Exploration Companies, which is a very active industry lobby group within my home state and which represents the junior miners in Western Australia, ran some very good ads that I think outline just how foolish this tax is. They had spokespeople—or actors acting as spokespeople—allegedly from other countries who were thanking the Australian government for its decision. They had a Canadian saying how wonderful it was that the Australian government would make such a stupid decision which resulted in more investment in Canada. They had a South African saying how wonderful it was that the Australian government would make it easier for people to invest in South Africa. This, of course, is what this tax does. Mining capital is globally mobile, and mining companies will look around and find places to invest where they believe that investment is going to give them the best return. The idea that because we have iron ore or particular resources in the ground they have to come and invest here is completely erroneous. If we make it too hard for them to do business then Australia will not be a competitive location for that investment to take place.

The minerals resource rent tax is a tax that Labor seeks to impose on economic rents that miners make from taxable resources—specifically iron ore, coal and some gases—at a rate of 22½ per cent. One of the greatest flaws of this tax is the way it has been implemented by the government. Even if you accept that a mining tax is a good idea—which I do not; I think it is a bad idea—the way that it has been designed and implemented by the Labor Party is surely a textbook analysis of how not to do public policy. The final version that we are discussing here today was a hastily cobbled-together arrangement with the federal government and the three largest resource companies: BHP Billiton, Rio Tinto and Xstrata. Those mining executives came to Canberra, sat down with Wayne Swan and his officials and completely and utterly ran rings around them. So now we have a mining tax that is going to penalise junior miners. It is going to penalise up-and-comers within the industry in favour of the largest resource companies, who are going to enjoy a very considerable tax shield because of the way this tax has been designed.

So it is a stupid tax in the first place, and then the way it has been implemented is going to impact on junior miners more than it will impact on big miners, who are going to enjoy a tax shield courtesy of the fact that those big miners came down to Canberra, sat down with the federal government and completely ran rings around it—because, of course, these guys know the mining industry and the federal government does not. A good example of that is that, after this was negotiated, we had Commonwealth Treasury officials calling Western Australian Treasury officials and saying, 'Look, can you tell us a little bit about this mining industry,' because the Commonwealth does not know anything about it. It has been completely outflanked by the big resources companies, who have given themselves an enormous competitive advantage through the Commonwealth government's and the Labor Party's complete inability to understand the mining industry. They have given themselves an enormous competitive advantage that will even help to possibly eliminate some of the competition for them. So the federal government sitting down with the three big resources companies, coming up with a tax that is good for them and bad for other players in the industry, is surely a textbook example of bad public policy making—even for this government, which has a history of gross incompetence.

That is why this tax is particularly divisive. It is overly complex and it will, of course, impact on some of those junior and up-and-coming miners, particularly in Western Australia—because that, of course, is the hub of mining activity around the country. I am deeply concerned about the impact that this tax is going to have on my home state, and of course it will directly impact on my constituents in Stirling as well. There was no consultation with anyone outside the big three within the industry, so no other mining company got a look-in to negotiate with the Commonwealth government on this ridiculous tax.

On top of that, there was no consultation with the states. There are officials and politicians in Western Australia that actually understand the mining industry. They live it. They breathe it. There is a Minister for Mines and Petroleum over there who knows the industry backwards. Of course, this is not expertise that was available through the federal Treasurer—certainly not—but neither was it available through the federal Treasury, because they are new to the mining game. Surely, if they had any understanding about what they were deciding, they would not have put forward such a flawed proposal as we are discussing here today.

Western Australia is going to be particularly adversely impacted by this tax. We have seen an arrangement over the last 24 hours where Western Australians will actually be penalised because our state government did the right thing and increased mining royalties on a resource which is vested within its control. It is well known that Western Australia has one of the largest and most diverse mining and petroleum industries in the world, and the state produces over 50 different minerals. In Western Australia, 75,000 people are directly employed by the mining industry, but for every one job that is directly created by the mining industry there are another three jobs that could legitimately be seen to be created through that mining industry activity. So, when we are talking about the levels of employment in Western Australia, it is clear that an enormous number of Western Australians are directly employed because of the efforts of the mining industry, and there is no doubt that this tax will cost some of them their jobs. You cannot isolate an industry for punitive taxation—an industry that employs so many people—and not expect that there is going to be a bad outcome for people employed within the industry.

This was made very clear in Western Australia in the 2010 election, when Western Australians overwhelmingly rejected this proposed mining tax. There are 15 federal seats in Western Australia, and the Labor Party held on by its fingernails to three, and we are looking forward to campaigning in those three in the upcoming federal election. Those three members—the members for Brand, Fremantle and Perth—will feel the concern and fury of Western Australians at being singled out for this particularly punitive tax.

As I have said, I think the idea of a mining tax is ill conceived, but if we were to have one then surely it makes sense to have one that at least conforms with the tax that was originally proposed by the Henry tax review. Ken Henry proposed a national profit based resources rent tax to replace state and territory royalties. I think it is a terrible idea, but at least that did not complicate the accounting and did not make life more difficult for the industry in the way that this tax is going to if it is passed.

It is impossible to be serious about having genuine resources taxation or royalty arrangement reform without actively talking to the states and territories. As I said, the consultation involved in creating this tax was only with the three largest resource companies. There was no contact prior to this tax being finalised with state and territory governments, which seems extraordinary given that state and territory governments are the ones that levy royalties and are the ones that control mining assets within their jurisdictions.

I have listened to some other contributions in this debate. Members opposite have been complaining that state governments have been increasing state mining royalties in light of this tax. That is just a great indication of how flawed the design of this tax is. The Commonwealth designed it so they will need to rebate those royalties if state governments increase the royalties that they levy on the resources within their jurisdiction. In Western Australia in particular, the idea of increasing mining royalties has been around for a long time. Indeed, the Premier has been on record as saying that he believes that mining companies should pay more royalties to the state for extracting those resources, and he implemented that when he came into government. The mining companies seemed to think that was a reasonable thing as well because they had enjoyed what were considered to be 'honeymoon rates' since the industry was opened up some 40 years ago.

An example of how flawed was the design of this tax is that the Commonwealth did not take into account that they were going to have to rebate royalties when they were increased by state governments. This is a great example of how hastily cobbled together this tax was and what a badly designed tax this is. There has been talk of a deal with the Independents that will alleviate the impact on Commonwealth revenues because of that design flaw. We will await the details of that, which presumably we will see once it has been introduced via amendments into the parliament.

This is a terrible tax. To single out a profitable industry for a specific tax because it is doing well is a terrible precedent for Australia. It sends all the wrong signals to international investment on which Australia so heavily relies. It raises the spectre of sovereign risk that has not existed in Australia for a long time. People expect the Australian government not to behave like some tin pot Third World dictatorship. They rightly expect the government to provide certainty for the business environment. If this tax goes ahead, it will drive a dagger through the heart of mining investment in my home state of Western Australia, it will cost jobs and it will stop junior miners from being able to compete with their more senior and well-established colleagues. It is a bad tax. We will repeal it in government, and I will oppose it with every breath in my body. (Time expired)

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