Sophie Mirabella (Indi, Liberal Party, Shadow Minister for Innovation, Industry and Science) Share this | Link to this | Hansard source

I rise today to speak on the Minerals Resource Rent Tax Bill 2011 and associated bills. I start with some words that appear to be rather wise. They were said at a keynote address to a CEDA convention in Perth last year:

There are two broad possible policy responses to the problems created by a two-speed economy: slow down the speeding sector; or reduce the impediments to the movement of capital and people from the lagging sectors to the leading sectors.

Slowing down the development of Australia’s mining and energy resource industries would be a scandalous wasted opportunity to lock in future prosperity and achieve social and environmental goals such as supporting school students in disadvantaged communities, Australians with disabilities, those with mental illnesses and others who are too sick to work, and preserving Australia’s unique biological diversity.

Easing the constraints on our mining and energy resource industries is by far the better way to go.

These words, believe it or not, came from none other than the Minister for Trade, Mr Emerson, on 29 April 2010—just three days before the government announced the mining tax. So not only does the Prime Minister not talk to her Minister for Foreign Affairs when she decides to take a new path on uranium exports to India but also, on such an important policy as this, obviously the trade minister was left in the dark. I normally do not agree with the trade minister—indeed on many things he just gets it plain wrong factually—but on this occasion his analysis is spot-on and I could not agree with him more. We cannot address the structural challenges that face our economy by tying a lead weight to the sector that is driving growth, creating prosperity and shielding Australia, to a certain degree, from international economic turmoil.

This mining tax really bears the hallmark of absolute Labor incompetence. After commissioning a so-called root-and-branch review of the tax system, the government was presented with no fewer than 138 recommendations, of which only 2½ were adopted. It is hardly surprising that a massive new tax was one of those. I can just imagine the former Prime Minister and the Treasurer drooling with delight at the thought of a huge new tax. You have to wonder what they were thinking. Were they thinking, 'Imagine how many pink batts, school halls and digital set-top boxes we can buy with all this extra money,' or were they thinking about what programs could replace those ones with the same degree of incompetence and mismanagement?

Make no mistake: this tax will inflict enormous damage on Australia's most productive industry. There are two fundamental myths that Labor likes to propagate when it talks about this tax. The first is that the mining industry does not pay enough tax and that a profits based tax is required. To begin with, the mining industry currently pays state based royalties as well as company tax. A company tax is, in effect, a profits based tax. So let us dispel that myth straightaway.

In a desperate attempt to wage some type of class war on the industry, the Labor Party made the absolutely extraordinary claim that the Australian miners are only paying around 13 to 17 per cent tax. Not only is this not true but also it exemplifies the astonishing lengths that those opposite will go to in order to demonise anyone who stands in their way. The mining industry currently pays in excess of 40 per cent tax, and this rate will of course increase substantially when the new tax is applied. What is more, this new tax directly discriminates against smaller and medium-sized mining companies, particularly those that are still owned largely by Australian shareholders. How perverse!

Perhaps this tax is an attempt by this Prime Minister to return to the so-called glory days of the Hawke government, when big government, big business and big unions ran the country. Remember what happened under that regime. Real wages actually went backwards. It was the powerful and the mighty deciding policy for Australia. This tax locks out the smaller and medium-sized companies which have the excitement, the enthusiasm and the drive to add to the productive output of the very important mining sector. You have to wonder. In her desperation, the Prime Minister just talks to the big boys, locks them in and creates a system of exclusion and penalty for smaller miners.

The legislation in front of us today is a result of a very bad deal that the government cut with the big players such as BHP, Rio Tinto and Xtrata. The words of Fortescue boss Andrew Forrest, a man who has had ties to the Labor Party and to other political parties, were that the MRRT is 'the bastard child of the RSPT'. He said that it is the bastard child of a tax which was ill thought out and so hideously complicated in the first place. They are very concise words from Mr Forrest. This tax will make Australia one of the most expensive places on earth to invest in the mining sector at a time when other nations are doing everything possible to reduce the constraints in their countries so that they can ride the wave of demand for mineral resources, primarily in China and India.

Our competitors are doing everything they can to foster supply, and this tax does the exact opposite. It is hard to forget the excitement of the Canadian Prime Minister on the day that the first version of the mining tax was announced, isn't it? He could not believe that any government would so deliberately shoot themselves in the foot when faced with such extraordinary opportunities for growth and for increasing living standards and the economic prosperity of its people. This tax is not a win for Australians; it is a win for Australia's competitors. As if the carbon tax were not enough in adding an extra burden to Australian industry, we now have another tax.

Over many months I have had the pleasure of meeting with representatives of many of Australia's mining companies and associated companies which support and supply the mining sectors, and I am told by many of them that this tax is going to create a disincentive to engage in exploration in Australia—to engage in mining activities in Australia—and that many other, developing, countries are becoming more and more attractive. The advantage we had of certainty of government policy, a stable political environment and a stable political system has been challenged by this brave new minority government, and the uncertainty and instability created by the shambolic way in which this government approaches policy are now making some of these developing countries, where certainty of government policy and stability leave a lot to be desired, actually look attractive. You have to wonder how bad this government's approach has been to the formulation of policy on mining and to the mining tax in particular.

I am told that a recent international survey on the attractiveness of investing in the mining industry gave Botswana a better rating than Australia. This is not to denigrate Botswana, but one would have thought that Australia, with its extraordinary history of mining and its extensive legislation and regulation in the area, would have come up higher on the list than Botswana. That in itself speaks volumes.

The second myth that needs to be dispelled is that the mining tax will fund an increase in superannuation from nine per cent to 12 per cent. This is not true—it is a myth that has been spread by first-class propagandists sitting opposite. The increase in compulsory superannuation contributions is going to be paid exclusively by employers, not by this tax. Let us be clear about it, because the decision to increase the compulsory superannuation will mean that employers will have to pay this additional cost, and no additional money will be given to employers from the mining tax to pay for this additional superannuation contribution. It is an extraordinary attempt at doublespeak: to try to repeat an untruth often enough and expect it to become conventional wisdom and accepted truth.

This is a classic Labor tax. It is a tax that will be used to fund the profligate spending habits of a grossly incompetent government which, some would say—increasingly so and in a louder voices and in bigger numbers—is the worst government we have seen since the creation of this nation. It is a tax with which the government engaged in shameless class warfare, and it is a tax that has been partly responsible for claiming the career of one Prime Minister. The process the government has taken to get to where we are exemplifies absolutely everything that is wrong with this government. When it was proposed, the tax was picked out of 138 other recommendations and substantially altered against the advice of Treasury. It has been widely condemned by industry as ill-conceived, ill-devised and hideously complex. It was the subject of a $38 million government advertising campaign which was only approved under the government's own guidelines because they considered it to be—guess what?—a national emergency.

I wish the government was as quick to act in a national emergency in parts of the country where there are national disasters. Covering a rural and regional electorate covering much of the alpine country in north-east Victoria, I understand the frustration of governments at all levels when there is no quick action in a national emergency.

They have absolutely no shame in wasting $38 million in a 'national emergency'—an emergency for the Labor Party to survive politically—and throwing away as much money as possible. But when the $38 million propaganda campaign did not work, they panicked and assassinated their first-term Prime Minister. It has been complete shemozzle, a total disgrace and an utter embarrassment.

Adam Smith once said that countries should focus on what they produce best and trade with other nations. The mining and resources industry in this country is an example of one of the things that we do best. We should not be taxing it out of existence; we should be doing everything we can to facilitate its growth. We are talking about an industry that accounts for about seven per cent of GDP, upwards of 20 per cent of national investment and more than 50 per cent of Australia's exports of goods and services. This is an industry that employs thousands of people and contributes greatly to Australia's prosperity.

Having listened to the contributions of those opposite, it is clear to me that either they just do not get it or the political survival of their Prime Minister is more important than the national interest. Despite the fact that these companies are making profits, those opposite personally attack mining bosses as some kind of outlaws and do their best to paint the industry as plunderers and pillagers who would destroy our country. It is an irresponsible and disgraceful approach to policy debate. They neglect to mention the incredible contribution that this industry makes to our economy and the benefits that already flow to all Australians.

This is a bad tax and I have no hesitation in opposing it, which is the only decent thing to do in the national interest. I look forward to working with my colleagues to repeal it should we win the trust and support of the people and therefore be given the chance to repeal the tax in government.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

Australia has abundant non-renewable resources which are expected to continue to command high prices driven by demand, particularly from China and India. The community, through the Australian and state governments, owns rights to Australia's non-renewable resources and should seek an appropriate return from allowing private firms to exploit these resources. Current charging arrangements fail to collect a sufficient return for the community because the arrangements are unresponsive to profits. Further, the current arrangements distort investment and production decisions, thereby lowering the community's return from its resources.

The current arrangements should be replaced with a uniform, rent based resource tax using the allowance for corporate capital method. The tax should be imposed and administered by the Australian government. A rent based tax would over time earn a greater return for the community from the use of its resources while still attracting private investment. Such a tax would also require the government to accept a greater share of the risks than it currently bears.

To complement the resource rent tax a cash bidding system should be introduced to allocate exploration permits. Australian and state government fees and stamp duties on the transfer of interest in resource projects inhibit the efficient transfer of such interests and should, except for those related to administrative costs, be abolished. The Australian and state governments should negotiate an appropriate intergovernmental allocation of the revenues and risk from the resource rent tax. Those are not my words; they are the words of Ken Henry and the Henry tax review of 2009-10. At the time, I supported that recommendation and I continue to agree with it now.

The journey over the last couple of years of implementing the changes needed to develop the concept of the tax into practice has been an ugly one, to say the least. I pick up on the words of the former speaker: we have seen multimillion dollar advertising campaigns and political leadership change all wrapped up in a number of reforms but largely shaped around trying to turn this concept into a political reality. This week I hope we do. I hope this country now takes the recommendation of Ken Henry from 2008-09 and turns it into another step along the way to comprehensive tax reform for a better standard of living for all Australians over the next 40 to 50 years.

A number of considerations were involved in my conversations with government over the last month about the eight bills before the House, which I understand will be voted on tomorrow. The priority for me has been staying true to the comprehensive tax reform package of Henry and others and ensuring that government, at the same time as it introduces the resource rent tax and the efficiencies that go with it, does not give up the game on trying to engage the states in the parallel conversation and work of reducing and, where possible, eliminating bad state taxes. State based royalties are among those in question, and they are at the heart of Ken Henry's recommendations.

I am pleased that through the conversations with government we have seen some further work on state tax reform. As was released yesterday, we will see a referral to the Brumby-Greiner-Carter GST review to look at—and, hopefully, make strong recommendations on—the issue of how the states can be incentivised to participate in comprehensive tax reform for Australia rather than preserve existing blocks in the system, such as horizontal fiscal equalisation and the Commonwealth Grants Commission process and the agreements struck previously around GST distributions.

These work as disincentives to comprehensive tax reform and create an ugly and inefficient game between the Commonwealth and the states in which there is fake rage about states' rights when in reality what is being argued for is inefficiency in taxation for all Australians at the expense of efficiency of taxation for all Australians.

So I am pleased that that referral has been made. I look forward to some strong recommendations from former premiers of both political persuasions. I understand that John Brumby and Nick Greiner will be making their initial recommendations in February. I hope that as a consequence of that we will see the start of some real engagement between the two levels of government on comprehensive tax reform for a better standard of living for all of us. At the same time, when any new tax is being talked about, I, like many, look for the taxes that will be removed. In looking at the eight bills that will be voted on tomorrow, it would be remiss of all of us if we did not look in detail at what taxes will be removed and what benefits will be gained as a consequence of this tax.

The entrepreneurs tax offset will be increased—there will be a 600 per cent increase, from $1,000 to $6,500, in the instant asset write-off for small business. This will mean, I think, a substantial benefit for communities on the mid North Coast and, I am sure, for many communities around Australia. Also of interest is the removal of the low-income contributions tax for superannuation for anyone earning under $37,000 a year. That will add about $500 a year to the retirement savings of the people directly affected. If we are the welfare capitalist state that we claim to be, we will see that as necessary, fair, equitable and just tax reform for a better community for all.

Also, the superannuation guarantee generally will, over time, be lifted from nine to 12 per cent. In following the debate on the superannuation guarantee over a long period I have been in the camp of those who supported 15 per cent as the goal. I was persuaded on this position by those who say that, if we are serious about having a sustainable retirement savings structure for the future of Australia, given its demographics—the ageing bubble that is coming through—the figure of 15 per cent is the one that will deliver. I will be interested to hear from those who try to argue otherwise, either through the argument that it is too much of a load on the business community to go from nine to 15 per cent or the argument that the future model for Australia will be a continuation of a public pension scheme alongside a private retirement scheme based around superannuation contributions over a lifetime of work. But I do not think we have had that conversation in detail to date—the debate on the question of the future retirement savings we are trying to build in the face of the coming ageing bubble does not seem to have gone into much depth. I look forward to that debate happening in detail in this parliament alongside the present debate, which seems to be focused specifically on a mining tax and not much else.

I also welcome the one per cent reduction in company tax—it is small, but it is a start—as well as reductions that will, I understand, be introduced into the parliament sometime soon to create some further cuts in personal income tax. Both of those changes are welcome.

So it is wrong to just say that the mining tax is another tax on the top of many other taxes. There will be one in, but there will be more than one out—probably three or four taxes are going. There will be a lifting of the threshold for small business at the same time as an efficient resource rent tax is introduced as part of comprehensive tax reform which goes back to the Henry tax review.

I am in the camp which says that efficiency and a profits-based mechanism is good while inefficiency and a non-profits-based mechanism is bad. This is not a states-versus-Commonwealth argument; it is an argument about efficiency versus inefficiency. Therefore, I think this is a sensible move. This tax is the first of the substantial taxes in this parliament which I have supported. I did not support the flood levy. I thought existing consolidated revenue should be in place to deal with natural disasters in a country where natural disasters happen on a yearly basis, and I thought our existing tax base should reflect that. I do not think one-offs are the way to go. I did not—and still do not—support a carbon tax, even though the argument that I do seems to have entered the language of the mythology of the day. I support an emissions trading scheme and always have, alongside the Henry tax review recommendation to do exactly that. I do so based on science and economics.

So, of the substantial tax reforms that are coming down the line, this is the first one that I will be supporting. I will do so based on the fact that some work is being done at the same time to remove other taxes. I will do so on the grounds that this tax part of an exercise of comprehensive tax reform and of engaging the states in future reform throughout 2012.

It is very unlikely that I will support any amendment that would lessen either the base or the rate of the mining tax; I am in the camp that is in favour of broadening the base and increasing the rate. I think we will see that, over the next 10 or 20 years, governments of any political persuasion will see that the opportunity presented by this tax for profits-based, efficient taxation is the sensible way forward.

Over the next 10 to 20 years we will see at some point the Commonwealth and the states engage in sensible conversations—and a deal—on how to lessen bad state taxes and engage in a broadening of the use of more efficient taxes, and I think this is the start of the journey. Whilst I have not seen any of the amendments from any of my crossbench colleagues or anyone else in the building, I think it is unlikely that I will be supporting anything from the member for Denison or from the member of O'Connor, and I will have a good look at any measures that the member for Melbourne proposes in order to broaden the base of the tax.

I thank many people for their conversations with me through this journey. In particular I thank Twiggy Forrest, who is a bit of a whipping boy of the government—and especially of the Treasurer—at the moment. Even though I might not agree with his arguments of the day, I find him an engaging bloke and I do not think it is right for government to play the man and not the ball. Fundamentally, my position is based on the judgment call that I am accepting Treasury modelling over Twiggy modelling. That does not mean I do not like the man, and it does not mean I do not think he or his company is a contributor to Australian entrepreneurship and society. The government should keep the focus on policy rather than on individuals, and I think that the government has dropped the ball and started to play the man over the last month in trying to win the political argument about the mining tax. But within the bounds of terms of trade, exchange rates, the profits of companies and market-versus-historical considerations on the value of mining assets, I am willing to back Treasury modelling that the big three will be paying in the first three years. It is a judgment call, and I think it is going to be right. Therefore I think this tax is a sensible reform for a better tax system for the future. (Time expired)

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

It is with much sadness that I stand in this House while it debates another new tax, the latest in a line of taxes over the last four years that continue to erode confidence in the economy of this great nation. The tax, spend and borrow philosophy finds its latest incarnation in the 11 bills being debated here today. The mining tax is another bad tax from a desperate and directionless government whose only solution to the chasm of debt and deficit created by its prolific spending is to introduce new taxes or increase existing taxes. It reminds me of a song by our one and only Peter Allen. The title of the song, Everything that is old is new again, is very apt at present, and it appears to be the only jig that this government knows. As can be expected, this government has not put much thought into the introduction of this new tax at all. It is a tax hatched in secrecy. It is another tax from a government grasping at straws. It is just another of their optimistic attempts at a money grab rather than a comprehensive review of our Australian taxation system. They got it from the Henry report, yet they were prepared to implement only two or three out of the 130-odd recommendations in the report.

The minerals resource rent tax, coupled with the carbon tax, will make the mining industry in Australia one of the highest taxed mining industries in the world and make it more difficult for our mining companies to raise new capital and compete internationally. Our international competitors who compete with us to supply iron ore and coal to China are already on the record as saying that they will review their prices to seek to erode Australia's market share, yet our own government is still pursuing the proposal of introducing a new tax which will weaken our competitive advantage. This tax resulted from an agreement that at the end of the day was made by the Gillard government with only of three of the many players in the mining industry. There was no consultation with our smaller mining entities, and this lack of a consultative approach has angered many. The frantic rush to push through this new tax and patch gaping holes in the tax design is done only to ensure that it is well and truly pushed through before any future election.

This government constantly bungles many of the things that it introduces or tries to introduce, and this mining resource rent tax is no different. I think that probably we are up to version 3 at this point, after starting with the RSPT. James Gwartney and Richard Stroup, as outlined in their paper 'Transfers, Equality, and the Limits of Public Policy', make the following point:

The proposition that transfer policies promote the welfare of targeted groups is generally accepted. Taxes, transfers, and regulatory policies are perceived to be adjustment levers available to fine-tune the economic machine that grinds out goods and services. If we do not like the allocation of economic benefits, corrective action can be undertaken by moving the levers via the political process.

They point out that this is a naive view of the transfer society and add:

Taxpayers and transfer recipients are human beings—

or, in the case of our present discussion, companies—

not sheep who can be shorn at will, their wool automatically growing back for the next shearing season. People—

or companies—

will adjust their actions for individual advantage, in response to governmental changes in the rules of the game. Similarly, since the political process, like the market, results from individual choices, it may or may not yield its stated goals. Thus, it is not obvious that income transfers emanating from the political process will promote economic equality or even help the targeted groups.

As I noted earlier, this tax is a bad tax and, no matter its popularity, the MRRT is shockingly bad policy. It has come out of a deeply flawed process. There was no consultation with state or territory governments despite serious implications for their own source revenue. The government should negotiate with the states on federal-state financial relations to simplify the tax system, and the member for Lyne made a good point about that. But the government does not have the ticker or the fortitude to engage with the states to do the hard yards on genuine tax reform, so it has come up with various workarounds. The end result has been to make the system more complex and messy than it needs to be. The MRRT and the expanded PRRT have been negotiated exclusively with the three biggest miners—BHP, Rio Tinto and Xstrata—to the exclusion of all others. As Henry Ergas pointed out in his article in the Australian on 18 November:

... in terms of distribution of costs and benefits, the MRRT is like the carbon tax in reverse: the carbon tax imposes a hidden slug on the many to benefit a handful of Greens and a gaggle of their cronies; the MRRT taxes the few to finance highly visible giveaways to the many. For a government addicted to raising taxes, that is as good as it gets.

As Thomas Aquinas said, the 'argument from authority based on human reason is the weakest' form of argument, always liable to logical refutation—and the coalition vigorously refutes the need for an MRRT.

There are some long-term consequences which I do not believe have been discussed or touched on. We need to look at the negative effect that these new and increased taxes will have on company profits. The consequence of reduced company profits is that companies will have lower dividends, and a flow-on consequence of that is that they will have lower share prices. Whilst a component of the legislation is to increase super contributions over the next six or so years from nine per cent to 12 per cent, bringing a magic nirvana from this vast accrual of new superannuation benefits, what gets overlooked in this discussion is that a significant component of people's superannuation funds are invested in the very mining companies which are being penalised under the MRRT and the carbon tax and any of the other taxes the government has increased. The consequence of that will be lower profits and lower dividends and so less of a return to members' superannuation funds. It is another one of the government's wonderful pea-and-thimble tricks: they give with one hand and they take with the other.

Another consequence of the MRRT is that the risk premium for new projects has increased significantly, thereby reducing the attractiveness of these projects for the mining sector in general. It brings into question whether these riskier projects will now even be undertaken. In particular, it will have a significant detrimental effect on the smaller miners, as they generally depend on the riskier projects to a greater extent and are the ones prepared to take those risks. As Henry Ergas pointed out:

… the MRRT is a tax on precisely the kind of entrepreneurship that has underpinned Australia's high living standards: the entrepreneurship involved in pioneering new uses of our natural resources.

In his calculations, he estimates that for the higher risk projects the cost of this tax could be in the order of 70 per cent. What is the economic benefit or incentive to pursue these riskier projects when there is such a high tax consequence? Hugh Morgan, former president of the Business Council of Australia and former Western Mining boss, is reported to have said that the minerals resource rent tax is flawed and accused the government of 'pork-barrelling'. The government's so-called masterful magical model is, as I said earlier, just another of their pea-and-thimble tricks—nothing more than a confidence trick, giving with one hand and taking with the other.

The minerals resource rent tax remains a deeply flawed tax, no matter how many amendments are brought forward by members in this House, and it will have a detrimental effect on the resource sector. The resource sector is the primary driver of our economy at present, so, as the consequences flow through to the mining sector, the tax will affect other areas of our economy which benefit from what the mining sector brings to us at present.

In conclusion, I refer again to the paper 'Transfers, Equality and the Limits of Public Policy' in which James Gwartney and Richard Stroup stated:

The impact of transfers on economic equality and poverty is far more complex than most people realize. It is not obvious that the political process will yield egalitarian transfers. And, even when it does, the net egalitarian impact may well be quite modest. Since annual income is a highly imperfect measure of economic status …

We have seen that over many years in the mining industry, with the vagaries of international commodity prices. the consequence, Gwartney and Stroup said, is that 'some slippage can be expected'. Yet this does not appear to have been built into any of the modelling. They went on to say:

Predictably, market adjustments will erode some of the redistributive effects of egalitarian transfers. An expansion in transfers of any variety will encourage rent seeking and higher marginal taxes, both of which will retard aggregate output.

In a struggling global economy struggling, this is the last thing we need in this country.

The coalition opposes the mining tax and has done so since it was first unveiled by the former Prime Minister. And now, in this final week of parliament, we are onto version 3. The coalition will still oppose it because it is bad tax and it is bad policy. It is bad for jobs, it is bad for investment and it is bad for the future of this nation.

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Minerals Resource Rent Tax Bill 2011 and related bills, including the Superannuation Guarantee (Administration) Bill 2011. The MRRT is a tax on the economic rents miners make from some of Australia's mineral resources—specifically, iron ore and coal. It will be applied at a rate of 30 per cent to all new and existing iron ore and coal projects. An extraction allowance of 25 per cent recognises the miners' use of specialist skills in the extraction of these resources. Companies with MRRT profits of less than $75 million a year will not pay the tax and miners with profits of between $75 million and $125 million will benefit from a partial reduction in their liability. Small miners investing to grow will also benefit from the immediate deductibility of upstream capital investments and will only pay the MRRT after a project has made enough profit to pay off these upfront investments.

The MRRT is being introduced in an era when the mining industry has been receiving historically high prices for Australia's resources. When you look at the trends and the movements in these prices it is quite extraordinary. For example, in September this year the price of iron ore was $177 per metric tonne; 10 years ago, I am told, the price was $12 a tonne. As recently as December 2007 the price was $36 a tonne. This massive increase in the price of iron ore has sent company profits through the roof. The net profit margin on iron ore to December 2010 was an astounding 48 per cent compared to an across-the-economy average profit margin for business of around eight per cent.

When you look at the effect this price rise has had on mining company revenues the figures again tell the story. In the six years to 2010 gross mining profits have risen around 250 per cent—from $25 billion to $88 billion. As an example, BHP Billiton made a profit of $4 billion in 2001 but 10 years later, in 2011, the company made a $22.5 billion profit. Only four companies in the world have ever made so much profit in a single year; the other three were multinational oil companies. And BHP Billiton produces oil as well.

The MRRT is designed to ensure that the massive wealth being generated by the sale of minerals such as iron ore does not go just to the private companies that mine the resource. Large miners, especially the two largest miners in Australia, have substantial foreign ownership. That means much of the record profit is actually heading overseas. And local miners are also gaining record profits from the sale of minerals. Gina Rinehart, the sole owner of Hancock Prospecting, is now Australia's wealthiest person. She is personally worth US$9 billion. And her fortune, made from the mineral resources of Australians, has climbed from US$2 billion to US$9 billion in the past 12 months alone. That is a US$7 billion jump in her net worth in one single year. In June 2011 Citigroup estimated that she is on course to become the richest person in the world. On this trajectory Citigroup expect her to overtake Carlos Slim, the Mexican magnate worth US$74 billion, and Bill Gates, worth US$56 billion, mainly because she owns her company outright. To quote Citigroup: 'It is possible to see Rinehart's portfolio of coal and iron ore production spinning off annual profits approaching US$10 billion, giving her a personal net worth valuation of more than US$100 billion.' On current projections, that will soon make her the richest person in the world.

Gina Reinhart has been very outspoken about the MRRT, speaking publically on the issue at every opportunity. In a recent article in the Australian Resources and Investment magazine, she talked of the need to attend rallies against the MRRT and to write to your local MP to oppose the MRRT. But I do not buy the story of a poor billionaire standing on the back of a ute whingeing that they pay too much tax. If anything, behaviour such as that should lead to the question of why there isn't a super tax on billionaires in this country.

Gina Reinhart also talked about the importance of slashing 'time and money wasting approvals permits and licences' and the urgent need to import short-term guest labour from Asia and India. Whilst people like Gina Reinhart gobble up Australia's minerals and grow ever-fatter profits, most of this bounty does not find its way to the ultimate owners of these resources, the people of the states and territories of Australia. I can only imagine that her passion and fight to halt the MRRT boils down to the impact it will have on her trajectory to becoming the richest woman in the world.

Another local beneficiary of the mining boom is Andrew 'Twiggy' Forrest, from Fortescue Metals, a person who claims to be a 'small miner', whose personal fortune soared from $US4.1 billion to $US6.9 billion in 2011 due to the soaring share price of Fortescue Metals Group. This is a company that has never paid any company tax. Mr Marcus Hughes, Head of Tax, Fortescue Metals Group, made that admission to the Standing Committee on Economics inquiry into the MRRT. He said:

We have not cut a corporate tax cheque to date, no.

Andrew Forrest has called the MRRT 'un-Australian' and 'unconstitutional'. The word 'un-Australian' is much overused as a descriptor of behaviour, but I certainly think greed is an un-Australian trait that trashes the ethos of a fair go. This is the sort of greed that we have seen from miners. In August this year Fortescue Metals announced a profit result that increased 76 per cent from the previous year, based on a 69 per cent leap in revenue to a total of $5.44 billion, yet they did not pay any tax on that profit. Try explaining that to a worker on the minimum wage who pays their tax every week, every year.

These profits are generated by the extraction of Australia's natural resources and I think it is responsible to ensure that those resources are carefully managed and the people of Australia receive a fair return for their resource. As we all know, they can only be dug up once and they can only be sold overseas once; you do not get a second chance. There has been research as to how long the boom will last, how long the resources will last. Some estimates say that identified iron ore reserves at the current depletion rate will be gone by 2036.

The MRRT gives all Australians a fairer return on these national assets while they are being extracted. The MRRT will be used to help support all businesses, and in particular small business. A tax cut of one per cent for all of the 2.7 million small businesses, commencing 1 July 2012, will help to support businesses that may not be doing as well as the mining companies of the Pilbara. The MRRT will help fund a $6,500 instant asset write-off, which means small businesses can immediately write off each and every asset purchased up to this amount. This tax write-off will help small business invest in growth and will assist suppliers and the manufacturing industry, through new capital orders. The wider one per cent tax cut for Australian businesses is a great example of how we can use the benefits of the mining boom to support all companies.

The MRRT will also be used to deliver a historic reform to every Australian's retirement savings. From 1 July 2013 employer superannuation contributions will be progressively boosted from the current nine per cent to 12 per cent. This reform will mean that a 30-year-old worker today on average earnings will retire with an extra $100,000 of savings. And for those entering the workforce at the age of 18 today, they will be better off by nearly $200,000. The Australian superannuation sector is one of the great successes of government action in Australia with over $1.4 trillion of funds sitting in the world's fourth biggest pool of super funds. Compulsory superannuation was introduced by Labor in 1993, and the latest reform to increase superannuation to 12 per cent will ensure that the average worker has substantially higher superannuation when they get to their retirement. That is a very important thing. This initiative will boost the super savings of 8.4 million Australian workers by $500 billion by 2035.

The MRRT also makes it possible to deliver fairer super concessions for the 3.6 million low-income earners who currently get little or no concession on their employer superannuation contributions. The government will end the taxation of superannuation contributions for any worker earning less than $37,000 per annum. These workers can least afford to have their super savings being taxed. By removing the 15 per cent tax on their superannuation contributions, the end result is that their superannuation balance will be boosted. The government has also announced that the superannuation    guarantee will be paid to a worker who continues in employment beyond the age of 70 years , which is a very commendable move as more and more people work later into their lives. In addition, the MRRT will fund billions of dollars in new roads, bridges and other critical infrastructure. Much of this infrastructure will benefit the regions where the resources come from and where the workers and their families live, generating work and income for these communities.

The mining industry in Australia will continue to make record profits and create work. One only needs to look at the massive $430 billion pipeline of investment in the mining sector, including $82 billion this year alone, to see that the industry has great confidence in the future. The MRRT follows great Labor initiatives I have spoken about such as compulsory superannuation, which, I might remind people, the Liberal Party voted against when it was introduced and until recently they have been against any change to it. I have noted a sudden conversion in the last week.

Years from now the community will benefit from gaining a fairer share of our country's mining riches. Industry bodies support the change from a royalty based scheme to a profit based scheme. It appears that the only opposition to the MRRT comes from the coalition, which always says no to anything that may benefit our country, and from the vested interests of the big miners. I commend these bills to the House.

Ken Wyatt (Hasluck, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Minerals Resource Rent Tax Bill 2011 and the associated legislation. The minerals resource rent tax is a project based tax on economic rents for mining companies who make profits from taxable resources, that is iron ore, coal and some gases. The tax is imposed on a mining company's mining profit less its MRRT allowances at a rate of 22.5 per cent. These bills were only introduced in the last sitting period and although they may have been in development since the Rudd government, there is no way we could possibly evaluate the possible impact of this tax on our own electorates and the small to medium sized businesses within them. Any uncertainty or lack of investment by the large mining companies will see many of these businesses suffer. They now compete against overseas contractors and companies to supply the mining sector and they do not need another albatross to be hung around the neck such as a resource tax that may have consequential flow-ons and unintended consequences.

It is interesting that in resource development, and certainly within my own state, there are tiers within the nexus of companies exploring and developing and creating the economic development but on the other hand creating supply demand that is raising prices exponentially in a way that makes it very challenging for locals. If you want to look at cost impost, look at service provision by state and territory governments whereby police, education and health sectors have to pay extraordinary rents for properties.

I agree with the minister when he says that minerals on the ground are for all Australians and this is a very worthy reason to looking at our national interest. So I wonder why the minister wants to implement this tax on companies when it will just result in them seeking cheaper input alternatives, even if this means going offshore. Governments must support small- to medium-sized businesses that are at the beck and call of mining companies.

There are many excellent local businesses in my electorate that contribute to the mining sector. I want to bring to the attention of the House several businesses that will be impacted upon by the mining tax in Hasluck. HV/LV is a switchboard manufacturer in Hazelmere. They are a local company with local staff and employ many apprentices. I have met with them several times and have always been impressed by their professionalism, the quality of their work and their competitiveness against international companies who make similar products. Even before the mining tax has been implemented, Steve De Mol was expressing his concern that his business has been losing tenders to cheaper offshore alternatives.

Dicko Harding from Orionstone, also in Hazelmere, has on several occasions expressed his concern about the introduction of this tax just when the economy seems to be picking itself back up after the global financial crisis. Pilbara Access Group, led by Stephen Easterbrook, has just moved its training operations into South Guildford. Pilbara Access Group is a high-quality scaffolding service for large mining sites. Their emphasis is on the provision of quality training and on an extremely high safety standard. They operate a number of training programs for apprentices and Aboriginal people. It would be a pity if they were to be affected by this tax and a disgrace if the government let this happen. Jeremy and Ian from Oztrac also expressed their concerns, as did those from WesTrak and Barminco.

Whilst I could talk about numerous other local businesses that would be affected, I only have limited time, which is disappointing because I care about these businesses and their workers. Hasluck has a large proportion of fly-in fly-out workers, commonly referred to as FIFOs. Many of these families rely on the one income, and any variation in this will see a number of families enter periods of hardship if employment opportunities are limited because companies make the decision not to expand their operations.

These families do not deserve to be treated with contempt by the Gillard government. They are making a living for themselves and looking after their families. We should support them as much as possible. I am concerned that this new tax will create job uncertainty and a potential loss of jobs offshore, and I will certainly fight for those families in Hasluck who rely on this important industry sector for their quality of life.

The Premier of Western Australia, Mr Barnett, has increased the royalty concession from iron ore and blown a $2 billion black hole in the Treasurer's budget. Again, the decision in New South Wales to increase royalties will put a $1 billion black hole in the budget. So we have the capacity for states and territories to continually look at the opportunities of resources within their respective states and territories and the contribution that they will derive from royalties that will provide the types of services that they are obligated to provide to their citizens. In Tasmania and South Australia, the respective state governments have also increased their royalties.

Every time a state or territory raises its royalties, this blows a massive hole in the Treasurer's budget. It is a long and slippery slope when a government declares war on states and territories. It is a state's constitutional right to determine how royalties are derived and used in their state. Mr Ken Henry confirmed that the Gillard government never sought advice on the constitutional validity of the mining tax. There has been no consultation with any of the state and territory governments about the implications of the mining tax for them.

This is an unfair tax, especially to Western Australia. My Western Australian colleagues and I will be advocating hard for the people of our great state. Royalties represent 20 per cent of WA state government revenue. This is extremely significant considering the infrastructure needs of the state—in particular, for infrastructure upgrades at the local level.

This incredible unfairness in distribution brings about the question of discrimination between states, presenting a potential constitutional crisis for the Gillard government. Already, the Western Australian government has signalled that they would pursue High Court action should the mining tax be passed. A sensible option to remedy this mess would be to sit down with state and territory governments. Let's not forget that Australia is premised on an agreement to unite in one indissoluble federal Commonwealth under the Crown and the Constitution, and the purpose, or the mechanism as I see it, of COAG is to enable Commonwealth and state and territory leadership to come together to establish and agree to a national approach—which, in this case, would be to pursue genuine tax reform by common agreement, not Commonwealth led. But, no, this government, which prefers not to consult and do things properly, sets that aside.

In the recent tax forum, the mining tax was off-limits, along with the carbon tax, which lacks logic. I would think it logical for tax forum participants to have had the opportunity to discuss the whole scope of taxes so that we could consider as a House those elements that would see genuine reform in taxation in this country. Two of the biggest taxes we have ever seen were off limits to a forum on tax reform in Australia. I find this inexcusable in our system of democracy. Instead, key negotiations were left to the government and the three biggest mining companies. This is incredibly divisive for the mining sector. All participants should have been included.

What has come from these secret negotiations? A tax which is only on iron ore and coal, another 287 pages of tax law which gives an unfair competitive advantage to the big three companies, who were allowed to design the tax. The Gillard-Greens alliance will create another industry for compliance officers and even more public sector workers to service this mess that divides the industry and takes nearly two-thirds of its revenue from just one state, Western Australia.

Who can forget the Treasurer on 10 May this year, during his budget speech, promising that the budget would be back in black by 2012-13? What we do know is that future revenue from the MRRT will be highly volatile and downward trending. Over the first year after the mining tax was announced, revenue estimates have jumped around, from $12 billion RSPT, to $24 billion RSPT with revised commodity price assumptions, to $10.5 billion post the Gillard mining tax deal and commodity price assumptions, to $7.4 billion post exchange rate changes, and then to $7.7 billion post further exchange rate changes. This indecision and guesswork is unacceptable at the smaller level that we have seen already from this bad government getting worse.

Now their modelling and predisposition for making mistakes will be applied to a gigantic new tax on a profitable sector of our industry and economy. It looks as if the government needs a miracle to get its budget back to surplus. This new tax will create that illusion in next year's budget but in the medium- to long-term the budget will be much worse off.

The Senate inquiry, which was chaired by my colleague and fellow Western Australian Senator Matthias Cormann, conservatively estimated that the net cost to the budget of the mining tax will be $20 billion—another quick fix by an incompetent government who cannot stop themselves from spending more and more of taxpayers' money.

This tax is punishing an industry which helped us through the global financial crisis. This is an industry which defines modern Australia and which so many of our people are involved with. We should be helping them rather than hitting them with a significant tax.

I listened to the minister in question time when he referred to a superannuation arrangement being derived out of the new tax. It was interesting to read in the Australian on Monday, 21 November 2011:

The Australian Chamber of Commerce and Industry has put that argument in perspective in its submission to the House of Representatives economics committee on superannuation. The boost to superannuation, the chamber points out, will be paid by employers through the superannuation guarantee levy, which will rise from 9 per cent to 12 per cent between 2013-14 and 2019-20. The chamber expects the Superannuation Levy Bill will ultimately cost employers about $20 billion a year.

The article goes on:

But employers fear that the 1 per cent cut in the corporate tax rate will fall well short of the costs of the higher superannuation levy.

The intent of the legislation is understood from what has been presented. Certainly, parliamentary colleagues on the other side who have spoken on this matter have raised what they see as the benefits, but one of the challenges we have when legislation is rushed in this chamber is that we do not get the opportunity to analyse its content and its consequential flow-on effects, nor to try to ascertain the risk management in terms of unintended consequences.

We are poised in a world global economy that is influenced by both the Eurodollar and the American debt. Should they waiver then our capacity to climb out of a global financial crisis is certainly likely to be limited. To that end, it is a pity that we are not looking at the opportunities to add value to the resources that come out of the ground.

I know we say that once we take resources out of the ground they are not replaced but I do not see that we are value-adding to those resources. I think there is also a need to consider the secondary industries which will add value to the resources that are there. I strongly oppose the Minerals Resource Rent Tax Bill 2011 and will stand up for the businesses and residents in my electorate of Hasluck. Considering the strength that the mining sector brings currently to many of the small businesses that exist within this nation, I would certainly welcome the opportunity of greater transparency in this legislation and consideration of those risk factors that might mitigate against the development of our economy. Let's hope that we do not look back and say that we had a great win from a government perspective only to find that we have limited the opportunity for our future generations.

Gai Brodtmann (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in this second reading debate on the Minerals Resource Rent Tax Bill 2011 and cognate bills. We have before us today yet another landmark reform of the Gillard Labor government. It is a reform that moves beyond parochial short-term interests towards the long-term national interest—a reform that ensures that there is continued investment in mining while lowering the overall tax burden of Australian businesses; a reform that ensures all Australians benefit from the natural resources with which this country has been blessed.

As we all know, these resources have a value on international markets. They are the raw materials needed to build growing societies and economies, which is why there has been such demand for these resources from Asia—and China specifically. However, it is clear that the prosperity resulting from the resources boom has not been reflected across all sectors of the economy. While mining companies have grown dramatically and have posted profits that challenge our imaginations, the rest of the economy has grown at a slower rate.

In fact, the profit reported by BHP Billiton last year was $22.5 billion. Rio Tinto posted a profit of some $14 billion, while that so-called 'small miner' Fortescue Metals Group reported a profit of almost a billion dollars. This means that for every hour of the debate in this chamber Fortescue Metals will make over $100,000 in profit, Rio Tinto will make more than $1.5 million in profit and BHP Billiton will make $2.5 million in profit. Yet we heard just the other day that, at least in Fortescue's case, they have not paid company tax.

I do not believe that some of these companies are contributing as much to society as is reasonable. I do not believe that this is fair. We have before this chamber, legislation to ensure that the entire community profits from the exploitation of resources which I believe belong to every Australian. As is the nature of mining we have but one opportunity to ensure that the benefits of our current resource boom are shared with all Australians. After all, we can only dig up these minerals once.

The member for Hasluck was talking about value-adding. I regard this legislation as value-adding for all Australians. That is the added value that we get from the minerals boom. This was certainly a view expressed in the Henry tax review, who thought the Australian community 'should seek an appropriate return from allowing private firms to exploit these resources', and:

A rent-based tax would, over time, earn for the community a greater return from the use of its resources while still attracting private investment.

Philip Daniel, the Deputy Head of the IMF's tax policy division, said this was a 'significant worthwhile reform' and urged other nations with large mineral deposits to follow our lead.

This legislation is particularly pleasing to me, as it allows for further reforms to two areas that are among my key passions and concerns: small business and the future superannuation savings of women. As many in this chamber know, before my election to this House I operated my own small business for 10 years. It was simultaneously one of the most exciting and exhilarating times of my life, but also an anxiety ridden part of my life. I do not regret for a moment branching out on my own and diving into running my own consultancy company, but there is a constant pressure that comes from knowing that your mortgage payments are entirely based upon your ability to manage your cash flow and drive your business forward. It is a daunting task, and the rate of failure is high, but, as I saw at my small business seminars earlier this year, there is no shortage of people out there willing to take on the hard but rewarding task of owning their own business.

These people play a very important role in the economy of the country—in fact, it is often said that small business is the backbone of the economy. So I am very pleased that the revenue from the Minerals Resource Rent Tax will go towards lowering the company tax rate and to the introduction of an instant assets write-off for small business for each and every asset worth up to $6,500. The impact that this will have on those small businesses, particularly start-up businesses, will be enormous. This is a significant reform that will mean so much to small businesses. They will now be able to buy new IT or some other equipment and immediately get a write-off on their tax. These changes will benefit Australia's estimated 2.4 million small businesses, including the more than 17,000 in my own electorate. On top of this is the cut to company tax that will benefit each and every company in Australia.

The legislation before us today will also provide a boost to the superannuation savings of Australians through the implementation of a better superannuation guarantee. Compulsory superannuation is now 20 years old. It is a Labor reform that has contributed greatly to making sure that all Australians have a comfortable retirement. However, it has become clear to me, and to many on this side of the chamber at least, that more must be done to ensure that people entering their retirement do not have to worry about their financial matters. Far too many Australians, women in particular, are not retiring with the level of savings they need to maintain a comfortable lifestyle. I have long had a keen interest in the retirement savings and financial planning of women, an interest that has only strengthened on being elected to this place.

Since becoming the member for Canberra I have seen too many women who are not in control of their finances. I have seen women who are the victims of domestic violence sleeping in their cars with their teenage children; women who are on their own with small children in search of social housing and financial assistance; women who are on the pension and still having to rent in the private market; and desperate women in their 60s, who are finding it hard to get work but need to keep working because they do not have enough for their retirement. It is for these women, and for the many more Australians, that this Labor government wants to increase the superannuation guarantee from nine per cent to 12 per cent. It is for these women that Labor will improve the super for low-income earners. It is for these women that Labor will increase the concessional super cap. Labor's reforms to the tax system and to the superannuation guarantee for low-income earners will assist so many Australians, particularly women who are employed part-time while raising a family.

I have said in this place before and I will say it again: a woman must have a strong superannuation account and assets if she is to have choice and if she is to avoid money worries later in her life. An education gives you choice. Fertility control gives you choice. And financial planning and independence gives you choice. This is one reason why reform of superannuation is critical. These reforms will help to ensure that for millions of Australian women retirement is not a burden, that woman will have financial independence into their retirement and will not need to worry about how they can afford to live.

I find it quite difficult to understand why those opposite would oppose these reforms. I find it really hard to understand how the party that claims it is the champion of small business is opposing tax cuts and tax concessions to small businesses. I do not know how they can be talking to small businesses in their electorates and telling them they oppose a tax cut. I do not know how they can be in here in this House, knowing, as this government does, that so many Australians are not going to retire with enough money, and opposing measures to do something about it.

Perhaps more concerning to me is the fact that, once again, if this legislation passes—and I believe that it must and will be passed—those opposite plan to repeal it. Let us be clear about what exactly they want to repeal, because it is more than just removing a rent tax on mineral resources. It will mean winding back the retirement benefits of millions of Australians. It will mean removing millions of dollars of tax concessions to small businesses. And it will mean not decreasing the company tax rate.

These are the clear messages from the Leader of the Opposition about what he would do if he becomes prime minister: those opposite, if in government, will not decrease the company tax rate and will remove tax and super concessions for small business and working families. Of course, they could remove the tax and keep these concessions and tax cuts, but they have not yet answered how they would pay for that or how they will fund the other promises in their $70 billion black hole.

While the opposition will oppose this—like everything else—the fact remains that this legislation is right for all Australians and fair for all Australians. It is in the interests of small businesses. It is in the interests of millions of Australian working families in their retirement, particularly women. And it is in the national interest. I commend it to the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Minerals Resource Rent Tax Bill 2011 and related bills, including the Superannuation Guarantee (Administration) Amendment Bill 2011. Firstly, the coalition opposes this bill. We opposed the original version of the mining tax unveiled by the former Prime Minister, and we oppose the second version of this tax, now known as the MRRT. This version 2 of the mining tax is a poorly developed and poorly designed tax which, when it is all boiled down, is nothing more than a lazy tax grab which will have dire consequences for our mining industry. It is bad for jobs; it is bad for investment. It is simply a bad tax, conceived out of a flawed process. Therefore, the coalition says no to the bill.

In saying a resounding no to this new tax, it is worth remembering a quote from one of the true entrepreneurial geniuses of our generation, the late Steve Jobs. Steve Jobs said of the secret of success:

… it comes from saying no to 1,000 things to make sure we don't get on the wrong track or try to do too much … it's only by saying no that you can concentrate on the things that are really important.

The coalition says no to the bill as it is a badly flawed bill that will take our country down the wrong track and prevent our nation from concentrating on the things that are truly important, such as improving our nation's productivity, encouraging investment, improving equality of opportunity for all firms, large and small, and reducing red tape. What is important is making sure we have a stronger economy to build a stronger nation. Unfortunately, our government fails to understand this. It fails to understand that no country has ever taxed itself into prosperity and no country has ever built its wealth by adding tax after tax after tax, as we have seen this government do.

This tax is being sold by a series of myths. We have seen the government up to their old tricks in peddling this bill to the public using a series of misrepresentations and untruths. The first misrepresentation and untruth peddled by this government is the line that Australians are not getting their fair share of the profits of the stuff being dug up out of our own backyard. Anyone listening to speakers from the government on this debate would get the impression that we have hoards of foreign mining companies invading our shores, ripping out our mineral wealth and chipping it out of the ground without paying anything. But the facts are that mining companies do pay royalties, and these royalties are set ad valorem rates, so as the price of the minerals go up, so do the royalties that the mining companies pay to the states.

Likewise, as profits of the mining companies go up, so does the company tax they pay the federal government. Then there is the payroll tax paid by mining companies, the superannuation they pay and the thousands of other small companies that benefit downstream from the investment from the mining companies and the industry. In fact, in 2007-08 mining companies paid $14.8 billion in taxes and royalties to the federal and state governments. Fast-forward just three years to 2010-11, and it is estimated that mining companies will pay $23.4 billion in taxes and royalties to the federal government—an increase of 58 per cent in just three years.

As a nation we should be recognising that we are currently receiving windfall taxes from the mining industry, and as a nation we should be using these funds to pay off government debt and to build up a surplus again, a surplus that was wrecked and wasted by this current government through their reckless spending. Instead, we see this government, instead of banking these windfall profits and taxes received from the mining industry, still borrowing over $100 million a day to fund its reckless spending.

The second myth that is being peddled is that this new tax will help small business. Of course, everyone wants to help small business; it is a motherhood statement. But these bills will force all small businesses across our nation to have to find an extra three per cent of their payroll in superannuation. This will result in the majority of businesses being worse off, even after reduction of the company tax rate. An analysis of the government's own figures demonstrates that these bills are nothing other than a tax grab.

According to the government's own figures, in 2010-13 it is budgeted that these new taxes will raise $4 billion. But they will only give back in that year $1.1 billion. In the following year, 2013-14, the government's own figures show that this tax is budgeted to raise $6.5 billion. But, again, it will only give back $2.5 billion. That is a $2.9 billion tax grab in 2012-13 and a further tax grab of $4 billion in 2013-14. These figures expose the true intent behind this mining tax and these bills. It is nothing other than a shameless tax grab, designed to create the illusion of an early surplus, deceptively dressed up and marketed with a falsehood of helping small business when it simply has the aim of plugging holes in this government's budget and making up for its reckless spending and failures.

When we look at the process of how this policy and how these bills evolved, it is a textbook example of how not to do it. Firstly, following the debacle of the mining tax version 1, we had a new Prime Minister promising to negotiate with the mining industry. However, instead of negotiating with the mining industry, this government did a secret deal behind closed doors with our three biggest mining companies—BHP Billiton, Rio Tinto and Xstrata—and excluded their more than 320 smaller competitors. BHP Billiton, Rio Tinto and Xstrata must not have been able to believe their luck when dealing with this government. Talk about come in spinner!

The same geniuses that negotiated GroceryWatch with the big supermarkets and our 'five for one' people swap with the Malaysians rolled up again with our three big mining companies to negotiate the mining tax version 2. No wonder the result is that these three big companies like the tax. They know that it will give them an unfair competitive advantage in the marketplace against their smaller competitors who were locked out of this negotiating process. These bills were a policy done by deal rather than a policy developed through extensive consultation and detailed consideration, and they are an example of what happens when business gets the better of slow-witted politicians without commercial knowledge.

We have seen, in just a few months, how the assumptions relied on by the Treasury carbon tax modelling are not worth the paper the modelling is written on. This legislation is badly flawed also, because it relies on modelling using a highly-volatile commodity cycle. I will give a couple of examples. In June this year, iron ore prices hit close to US$200 per tonne, but last month the spot price had collapsed to US$116.90 per tonne. Look what happened to iron ore prices following the GFC. They simply fell off a cliff, going in a very short period from close to US$200 per tonne to less than US$70 per tonne. Coal prices fell off the same cliff with the GFC. But this is not unusual, and it should not have been unexpected. This is how commodity cycles in prices have risen and fallen over the last 200 years. To think that the future will be any different is naive.

While it is possible that for a short time the commodity cycle may continue to defy gravity, the weight of our 200-year history is against it. If a contraction in China's economy does not send prices crashing down, there is a flood of new supplies of iron ore and coal coming online from around the world, and our competing producers will force the prices down. You would need more than a crystal ball to be able to predict where iron ore and coal prices will be next year, let alone where they will be in five years. Therefore, because of the modelling used by this government—the secret modelling that no-one has been able to see—it is highly questionable whether the tax will deliver the streams of revenue that the government claims it will.

The ideology behind this tax also demonstrates that we have a government which fails to understand the concept of superprofits. These only occur in the short term in a competitive market. Superprofits are the reward for human ingenuity and entrepreneurship. Superprofits drive innovation—the innovation that creates our wealth and prosperity. But the government, with their socialist tendencies, see superprofits as simply windfalls for evil capitalists. Mining, like all other industries, relies on entrepreneurial insight for success. It is a risky business, where superlosses are just as likely as superprofits. The current mining boom is no accident. Australian miners were not simply sitting on their hands when Chinese and Indian businesses decided to go on their current buying spree and drive prices up. Australian miners have spent time, money and effort in searching out mineral deposits and developing the capacity to exploit these resources. Had there been no demand for these resources—had the increased demand from China and India not occurred—these miners would have lost much of their investment.

The ability of exploration and mining companies to raise equity and capital for future projects is critical to the development of our nation. There is a real threat from this tax that smaller miners will find it even harder and more expensive to raise funds to invest in the first place. At a time when dark storm clouds are gathering on the economic horizon, the very last thing this government should be doing is hitting our exporters with a big new tax which our overseas competitors do not have to pay. Make no mistake: this tax will make investing in Australian coal and iron ore projects less attractive than investing in those overseas and less attractive than investing in resource projects that are not subject to the tax. Compared to the current situation, it will penalise high-risk projects.

With this legislation, Labor has announced a range of policy changes that all seem on the surface to be very favourable—an increase in compulsory superannuation, small business infrastructure spending and a cut in the company tax rate, for example. But what happens if the mining tax does not raise these funds as expected? On the current estimates, between now and 2020 the cost of the initiatives that Labor says are funded by the mining tax adds up to $58 billion. But, according to the Treasury's own estimates—estimates for which the modelling is hidden—the mining tax will raise less than $39 billion. The key assumptions remain secret. A structural deficit has been built in through this tax.

These bills also demonstrate the commercial naivety of members of the government, who, although well credentialled in economic theory, are simply clueless when it comes to the real world of business. The flaw in this tax is that, unlike with royalties, multinational companies have the ability to use transfer pricing—shifting overheads, debts, expenses and profits from country to country—to reduce their taxation liability. Further, this new tax, because it only applies to coal and iron ore, gives large mining companies involved in mining other minerals the ability to shift expenses and profits between different mines. Although transfer pricing is not permitted in Australia and the ATO has wide powers to determine whether companies are engaged in transfer pricing, there remain many perfectly legal ways that companies can achieve the goal of shifting revenue to foreign tax havens. Further, the ATO's ability to act against transfer pricing was only weakened recently when the ATO lost a Federal Court case against a French company over its purchase of chemicals from its parent company. The ATO also went on and lost the appeal. This has significantly narrowed the basis on which the ATO can act on transfer pricing, which undermines the fundamentals of this tax.

Finally, I go to the hypocrisy of the government about superannuation. They have not put one single cent into the Future Fund since they have been in government. (Time expired)

Amanda Rishworth (Kingston, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Minerals Resource Rent Tax Bill 2011 and related bills. Before I start, I note that the member for Hughes feigned concern about this tax not raising enough money to cover all the measures it is supposed to pay for. I hope that he is in his party room raising this concern with the Leader of the Opposition, who has committed to all these wonderful initiatives but has no plan—no idea—about how he will fund them. He has just said, 'We'll match the government on these things,' with no plan. I hope the member for Hughes, in his party room—where he is probably off to now—raises this issue with the Leader of the Opposition: 'How are you going to fund the superannuation increase?'

I am very pleased to rise to support this bill to ensure that Australians get a fair share of the wealth created by mining in this country. Australia is blessed with a wealth of natural resources. Since the beginning of the mining boom in 2004-05, commodity prices have been increasing and the Australian mining sector has experienced significant growth. More recently, revenue from the mining industry finished at $138.8 billion in 2006-07 and is expected to grow to $208 billion for the period 2011-12. The mining industry remains Australia's most profitable industry and continues to grow with record profits, and I believe that all Australians deserve to share in these profits as mining booms in this country. I do believe that Australians have the right to expect the benefits of the mining boom to extend beyond the mining industry itself and to spread right across the country. The truth is that our resources—the resources that belong to the Australian people—can be dug up only once, and we need to make this opportunity count.

While the mining boom has benefits for this country, including creating jobs and wealth, the strong demand for Australian resources has pushed the dollar high. As a result, we have seen that some sectors of our economy, including agriculture and manufacturing and many companies that export Australian made products, are struggling. There have also been impacts on tourism and on our foreign student education industries. This is creating a challenge in our economy, and I am proud to be part of a government that has the courage to tackle Australia's economic challenges to ensure that we keep our economy strong and keep meeting the challenges into the future. It takes this government, a Labor government, to continually stand up to fight for what is in the interests of all Australians, not just the privileged few. Just as they have always done, the coalition will carry on saying no to all initiatives that are in the national interest, spreading their fear campaigns and standing up for vested interests. We will continue to do what is in the national interest and we will continue to invest in this country's future. This is what these bills are all about: investing in our future and a down payment so that the benefits of the mining boom to continue well into the future.

One of the measures that I am very proud of is the increase to superannuation. We heard previously the member for Hughes disagree with the increase in superannuation. He is clearly in the camp of the shadow minister for finance's camp, not that of the Leader of the Opposition. On this side of the House we are united in wanting a boost in superannuation savings from nine per cent to 12 per cent. This will benefit 8.4 million workers and increase the pool of retirement savings by $500 billion in 2035. That will mean that a 30-year-old full-time worker on average wages will retire with an additional $108,000 of savings. Just in my electorate of Kingston the benefits of the increase in the superannuation guarantee will reach almost 48,000 people. This will provide a significant amount of support for many people who are working within my electorate and who are on low incomes by helping them secure a more comfortable retirement. The reality is that most people will outlive their supply of money, so it is important that we are making sure that savings are available to them. We know the opposition does not agree with this and we know that, when superannuation was introduced, the Leader of the Opposition thought it was just a con job. I hope that he has changed his mind on this. I hope that he has now seen the immense benefits that superannuation has brought and that he will support our moves to ensure that there are greater savings available to those in retirement.

We have seen that, in stark contrast to Labor, the coalition has had no super policy—no increase in the super guarantee and no plan for the future, just opposing one day and perhaps supporting the next. They have no clear view of how super will be funded. They will just go along doing what they think is in their political interest and not what is in the national interest. We have a clear plan about what we believe is important for this country's future, and I am pleased that super is part of it.

The bills before us also deliver significant savings and benefits for business. In fact, 2.7 million small businesses will be able to access a $6,500 instant asset write-off, and this is very important for over 13,000 businesses in my electorate. This will be a very welcome tax break in any asset purchase that they might make. In addition, we are reducing the company tax rate from 30 per cent to 29 per cent, so ensuring that all businesses can be competitive. Businesses that are not caught up in the benefits of the mining boom can still receive this benefit. Once again, we are not sure where the coalition stands; whether they support business or whether they do not. What we do know is that, though they might not like this tax, they have introduced levies and that a whole range of taxes by any other name are in their policy. But, when it comes to it, we will see just how they will vote on this benefit to businesses right across the country.

In addition, there is an investment in infrastructure, and this is so important. While the previous benefits of the first mining boom were absolutely squandered by the Howard government, with no investment in long-term infrastructure, we see investment in infrastructure as critical for the productivity growth of this country and for the future. That is why, especially in our mining communities, we are committed to taking some of this revenue and ensuring that investment is for the long term—and the long term for these communities is building the infrastructure that is so desperately needed.

So, once again, looking to the future, whether it is the future for our working Australians, the future for companies with the reduction of the company tax or the future for the mining communities and their infrastructure, we are delivering the benefits of this mining boom right across this country. And why shouldn't we—after all, these resources are owned by the Australian people.

This government has said that we are not going to squander the benefits of this mining boom as the previous government did. We are not going to have nothing to show for the mining boom once it has gone. We are putting the right policy settings in place to ensure that in 10 or 20 years time there are real benefits to be shown for the current mining boom.

This is an important bill and I hope the opposition will support it. I hope they do not continue to read from the same song sheet they always read from, which is, 'No, no, no, no, no.' I hope they will see the sense in this. The Australian people support it. People right around this country want to see these benefits, and I hope the opposition gets on board and supports this bill.

Andrew Laming (Bowman, Liberal Party, Shadow Parliamentary Secretary for Regional Health Services and Indigenous Health) Share this | Link to this | Hansard source

I thank the previous speaker for a very powerfully read speech, but I will disappoint her by saying we will not be supporting this tax, and for that there is a very simply reason. Apart from during the very unique conditions in the 1970s, when we had the petroleum resource rent tax, it has not been the habit of the Australian government to hack into sectors to try to capture some of the surpluses in one sector, when it looks like it is doing well, to the exclusion of others. Like most countries in the world we have always had an economy-wide income tax, an economy-wide withholding tax and an economy-wide company tax, and that is by far the best way to protect an increasingly internationalised world of trade and commerce—the golden goose that is laying the egg for Australia.

Let us make no mistake about just how important the tens of billions of dollars being generated through the mining sector are to Australia. It is just a little too easy for government to say, 'Gee, wouldn't I love another cut of that.' The bottom line is that if mining is doing well Australia does well, and we reap the benefits. We do not need little exceptional rules for each sector when they are doing well. We do not need to go to the banking sector and say, 'Gee, they were good profits last year. Why don't we hack into that as well?' It is a very simple principle that all sectors have an Australia-wide company tax system, and it works exceptionally well.

I can understand that many in the gallery may well say: 'But it looks like a cheap source of money. There is not much that those big nasty mining companies can do about it. All those profits are being repatriated overseas.' It is almost irresistible to delve into this sector and try to claw back just that little bit more. For what? To help pay for our out-of-control spending, of course. That is the motivation and we know it very well. Everyone knows, and it is no great secret, that this government has never balanced its books. It has never balanced the budget in the time it has been in office. The whole problem with the continual proposition of taxes from this government is that they are only trying to cover up their out-of-control spending. The problem for this government is that every tax they conceive of and dream up never quite covers up their runaway spending.

The great problem for the government as they negotiate this MRRT is that they can see that even by 2019-20 the mining tax will not be large enough even to cover one of their commitments: the increase in superannuation for workers. This will cost $3.6 billion in that year, but the mining tax is projected to raise only $3 billion. Of course, that is a decade away, and we do not need to think about that now. However, this government is not mesmerised, not preoccupied but utterly fixated on dreaming up new taxes to partially cover up their out-of-control spending. It is on this platform that we are having this debate today.

I want to make three very simple points. The first point is that the government is repeatedly referring to these 'non-renewable' resources as if one day we will wake up and they will all be gone—as if there will come a time when we have dug up everything and Australia simply has no more to give the world. Nothing could be further from the truth.

The second point is that it is a misconception that these minerals can only be dug up once. Throughout the history of gold exploration we have seen that once you leave a mine prices change, and the very tailings you have dug up suddenly become a gold mine again. We have no idea what the price of resources will be 10, 20 or 30 years from now. On current levels of exploration and by predicting prices we can arrive at estimates of the life of resources. I will quote the people who know best. I do not need to restrict my comments to just coal and iron ore, which are under consideration in this bill. In 2008, black coal was projected to last for 90 years. Then, in the following year, that figure was revised to 100 years. The projection for brown coal is 4.7 centuries. No-one is saying that we will exhausting those reserves. The notion that we had better capture some of the resources through a rent tax on coal, before it runs out, is completely spurious. Coal will be around in this country long after we have shifted off coal and onto something else.

The third point concerns iron ore. It has an expected 70-year life. In 70 years time, when we are moving into the next century, we will be talking about completely different materials which yet do what iron ore does right now. I do not know what they will be, but one thing I am pretty sure of is that we are not facing a situation where our resources will run out tomorrow. The lives of the other minerals are as follows: bauxite, 85 years; copper, 95 years; lead, 55 years; mineral sands, such as ilmenite from my own electorate, 110 years; nickel, 145 years; and, uranium, 140 years. My simple point is that I do not think we need to panic today that those resources will not continue to be available for a significant period.

What we need to do in these circumstances—and I think most people viscerally get it, even though it is tempting to say, 'We would love a bigger slice of the pie,'—is to say: 'How do we make this pie bigger? How do we guarantee that our kids can get a job in that sector? How do we make sure that the actions of that lot over there do not lead to a simple shift—what we call the internal shift—in investment to other continents where there is no mining tax in place? Where there are two otherwise equal reserves, one in Africa with no minerals tax and one in Australia with a minerals tax, the tax will distort investment decisions. I need to make sure the next big investment in mining occurs here in Australia. I want the next big piece of plant and equipment right here.'

With due respect to the government I would not say that all investment will stop with a mining tax, but there needs to be only a one, two or three per cent distortion—perverse investments resulting from tax and sovereign risk under this government—for the tax to affect the jobs of people sitting up there in the gallery, and their families.

I am not making a hysterical claim that the tax will close the sector down—even the mining companies do not say that. But I do know about the one, two or three per cent distortion that I mentioned. The ability of this nation to supply China and India needs to be allowed to take its own path under the existing income tax rules of the land. Those rules serve us perfectly well. They do not serve a government that cannot control its spending, but they serve everyone else perfectly well. They served every previous administration of this country perfectly well, but not this lot—they are out of control.

The government has more promises to meet and more special interest groups to suck up to, and the only way to do that is to come up with taxing ideas. Typically, with this tax the government is fining a sector that cannot fight back. It is fining a sector about which the average person on the street says: 'Yeah, have a hook at them. That'd be okay. I'd love to get some of their resources. I'd love to capture some of what they've got. I want to do a bit of naked rent seeking on the mining sector. Easy target, aren't they?' That is why we are having this debate today.

As with its promise in mid-2010 on the carbon tax, the government has lost their way on borders and on the mining tax. What we are debating here is, I believe, slightly better than what the previous Prime Minister came up with—but only barely. There has been no consultation with industry and no agreement reached with the states, who, until now, have been responsible for collecting the royalties on mining. Most of the consultation that has been done has been done in secret and has excluded sectors of the mining population, including small miners. Why did the government have to do it like that? Why can't a government simply speak to miners as a whole, speak publicly about the negotiations, take the recommendations of its own Ken Henry and implement them? No, that would be too messy and too exquisitely painful; the government would rather do a deal with the big three before the election and leave everyone else out of the equation. That is a new way of government, isn't it? That is an interesting way to work—leave out thousands of miners or, in the case of iron ore and coal, hundreds of operators.

The thing we ask for as Australians is not consultation so much as the basic principle of engagement: actually coming and talking about the impact the tax will have. If you go and visit a mining site in Western Australia, they will tell you, 'We've never seen a Labor person up here.' Short of someone flying in in a Learjet and flying back out in the VIP jet, do they see Labor members coming up and learning about Australia's greatest export sector? No, Labor members get lost there—they never go there. It is almost as if they do not want to go and talk about it. I respect the fact that there are significant interests involved, and when I talk to people in the street there is some support for a mining tax. But the simple fact is that previous administrations never stooped so low.

The income tax system of Australia was satisfactory for running our economy. I have talked about the one unique exception to that—setting up activities in the North West Shelf at a time when capital was extremely difficult to secure. Again, the federal government is trampling over the states. We know that this is predominantly a Western Australian and a Queensland issue, but the government has been unable to reach agreement even with these Labor states. We are not talking about renegade states from that other side of politics; these are Labor states with which the government cannot come to an agreement on this tax.

People on the other side may be able to cobble together deals and get Independents to support this bill. I can understand that; I can understand that at the most superficial level there is some attraction to seeing big dollar signs in front of your eyes. But I implore the Australian people to see this government for what it is. In fact, they already do see this government for what it is, but I implore them to look even more closely at this issue and recognise in it a government which simply cannot contain its spending, cannot contain its fiscal haemorrhaging and cannot make a truly tough decision about pulling back the money it provides to different parts of the economy to which it feels it owes something.

The government is now effectively holding our federal budget hostage to what state and territory governments do. That is also a significant concern, because this place no longer has the ability to talk about where we will be with a balanced budget in 2013-14. That is not good. Also, of course, the government is basically sucking $25 billion of $38 billion from a single state with no agreement about how best to do it and no agreement about how that state will benefit. I think it is fairly reasonable to ask for an open and transparent process, but N.O.—that has not happened. Has the process been inclusive of small miners? N.O.

Anyone who truly thinks about this tax should really expect better of their own government. The right thing is for this lot to go back and do it again properly. We do not want deals around Chinese restaurant tables in smoky rooms where the government cuts a deal with the big three miners. I would like to have seen the government talk to the Australian miners: the Australians who are domiciled here, the shareholders who actually support the innovative, fast-growing and risk-taking Australian companies. But no—that would have been too messy, so they have been left out.

I think I speak on behalf of many Australians when I say to this government: please get your spending under control. That is the big issue, isn't it? If we could get the spending under control, we would not need these distortionary taxes. It is almost impossible for us to convince those on the other side that mining is in fact an international enterprise. We live in a world of globalised and internationalised trade and commerce—and, of course, mining effort. In no way do the major miners want to remain exposed to the sovereign risk of Australia. They are involved in South America or in Africa. They will simply make internal supply changes and invest in Africa just that little bit more, but those changes will be enough to cost jobs. Never forget that three years ago we were always hearing from Labor members the guarantee that no single worker would be worse off under their extreme laws. These guys cannot make that guarantee for any single worker who is working in any Australian mine as a result of this MRRT. I urge every Australian to wake up to the reality of what is happening over here. We can have lower, simpler and fairer taxes, and they will be delivered by this side of politics. We will do everything we can to draw this government back to the fundamental problem it faces—its inability to restrain its spending.

Debate adjourned.