Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The House Economics Committee held an inquiry into the Minerals Resource Rent Tax Bill when it came before the parliament. As part of that inquiry we interviewed Mr Julian Tapp, from Fortescue Metals Group. I asked Mr Tapp about the corporate tax paid by FMG, then a $20 billion company. My question to him was: 'In terms of corporate tax paid, it would not be correct to describe Mr Forrest as a taxpayer, would it?' The response was: 'Mr Forrest is not a company. Fortescue Metals Group is a company.' I then said: 'But, as things currently stand, it would not be correct to describe'—and the reply from Mr Tapp was: 'We have not cut a corporate tax cheque to date, no.' So FMG, despite describing itself as a taxpayer, was not at that point a corporate taxpayer.

It was in that context that Labor put in place the minerals resource rent tax—a tax which recognised that, from the early 2000s up until the height of the boom, the share of mining profits returned in tax had fallen from one dollar in three to one dollar in seven. Indeed, it was the Minerals Council of Australia itself that went to the Henry review and put forward a submission arguing for a profits based tax. The Minerals Council of Australia did so not because it is a secret commonest haven but because the Minerals Council of Australia recognised, as did so many serious economists around the world, that profits based taxation is a fairer form of taxation.

Let us be honest, the way in which royalties have been administered since the start of the boom has had a profits based sense about it. Queensland and Western Australia have increased royalty rates as the world price has gone up and they have done so because they have recognised that the rise in the world price is not due to the ingenuity of our miners. Australian miners are ingenious and have put in place a range of new technologies that are at the cutting edge of minerals extraction, but they are not responsible for changes in the world price of iron ore, which has gone up to a large extent due to increased demand, principally in China but also in India.

Honourable members: Korea.

And Korea, I hear an honourable member interjecting. The increase in that world price ought to be captured in part by Australian taxpayers—and it has been through the increase in royalties—and a profits based tax represents that principle. That is why the Minerals Council of Australia asked the Henry tax review to consider a profits based regime. That is not a controversial notion around the world. A little known politician by the name of Sarah Palin made her name as Governor of Alaska championing profits based taxation. She did so because, as she argued, profits based taxation was the right solution for Alaska.

When Australia put in the petroleum resource rent tax in the late 1980s, there was much ado about it. Over two decades later the petroleum resource rent tax has brought billions of dollars of revenue into Australia, and it has done so through the principle of profits based taxation—a fair and reasonable principle, grounded in sound economics, recognising that scarce minerals can be extracted only once. On the principle of equity we should support it, but not just on the principle of equity. A profits based tax should be supported on the Burkean grounds that many of those opposite would champion. Edmund Burke took the view that we are here not just for the generations of today but informed by generations gone and inspired by the needs of generations to come. Generations to come will not thank us if we do not ensure that minerals extraction is done at a fair rate of tax—not an exorbitant rate of tax, not a rate of tax that shuts down the industry, but a rate of tax which over recent years has seen expenditure on private minerals exploration go from $5.7 billion in 2009 to $7.8 billion in 2012-13.

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