Barnaby Joyce (Queensland, National Party) Share this | Hansard source

I suppose it is very important at the start to say what some of the issues with the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 are. The reason managed investment schemes work is that there is a tax advantage to them, and with the advent of MIS we have had the take-up of prime agricultural land. I refer especially to cane growing agricultural land, which has been taken out of cane production and is now used for timber production. Some might say, ‘So what?’ What happens is the capacity of the mills in those areas is lost because they need a certain economy, a certain size of cane crop to survive and, ultimately, if this keeps on going, the mills get to a stage where they have to shut down. People say: ‘So what? The mill shuts down.’ What happens is that the people who are employed at the mill lose their jobs. The farms that are left over become unviable because they cannot add on the transport component to another mill, so they are put at an economic disadvantage. The school shuts down and the doctor leaves. It is an extremely bad decision.

What is so galling about it is that it is not a decision driven by the market; it is a decision that has been driven by government legislation. We know for a fact that people might say, ‘We’ll put timber there instead.’ Timber does not require the sort of labour component that farming requires. It does not have the same inputs. It does not require the commerce that farming requires. There is a whole major dislocation by reason of this coming into the marketplace.

You also have some other serious issues that come into play. You have this unnatural and unwarranted differentiation by reason of a fence: one person, an individual or a partnership on one side of the fence is not entitled to the deduction, because of the way MISs operate—they need to have a financial services licence, a corporate entity, and the oversight of ASIC. So one person on one side of the fence does not get the deduction and the other person on the other side of the fence—the big corporation—does. It is unnaturally unfair. If you believe in the marketplace, it is a complete dislocation of the so-called market theory that things should happen where they are supposed to happen, not where they are inspired.

In this legislation there are a couple of issues we need to look at. First of all, I quote section 40-10 where it states:

You can deduct amounts for capital expenditure for the establishment of trees in carbon sink forests.

What exactly does that mean? It means that I can go out and, if I am a major coalminer, buy $10 million, $20 million or $100 million worth of land and get an up-front tax deduction for it—straight up, straight off the bat. Until 2011-12, that is exactly what I will get. There are obvious ramifications when that happens. We have to look at where there is a sense of commonality. If this is about marginal land and about giving farmers a go on marginal land in areas where they could not use it for other purposes, then we should so prescribe it in the legislation to say exactly that. There is immense capacity. We can see that with the oversight that there is currently—which is actually the bane of so many areas of native vegetation acts—where they can tell you to the square foot what you can do and what you cannot do with land and how it is used. If you want to go down that path, how about we use that to the advantage of farmers and say, ‘If this is prime agricultural land because it has had a return, because it has a certain rainfall, because it is of a certain style capacity’—and we have all that information at our disposal—‘then it is embargoed from being used for tax inspired forestry schemes’? If you want to buy it on the free market like anybody else, go right ahead, but do not use a government inspired tax advantage to get you in the front door. That is an issue. This is one of those crazy things where we talk about the market but we do not believe in the market because we are affecting the market in that we are giving someone an inherent advantage that another person does not have.

Let us go through some of the other issues. We have heard this afternoon about what happens if a person spends $100 on putting in trees and then he gets a $30 tax deduction. The reason he gets the $30 tax deduction is that a 30c in the dollar tax rate is implied. And then he or she knocks the trees down. Let us take the next step. What about if the person buys or spends $100 putting in the trees and they do not go out and sell the carbon credits because there are no carbon credits to sell? They have just put them in the ground. There are no carbon credits there, but they sell them to someone else. All through this legislation, and I refer to clause 40-1005, it talks about the responsibility to you—not the responsibility to anyone else after you have gone or you have sold it. This is obviously a flaw in the legislation.

In this nation we do not want to lose productive lands to a tree crop that will produce no food. Let us think about that. Less food means that we put upward pressure at the grocery store, we put upward pressure on food prices—and I would have thought that we would be trying to put downward pressure on those. Secondly, we destroy the regional economy, and that has a multiplier effect because it makes those who even surround the forests unproductive. They lose their economies of scale and they lose their vital infrastructure that is attached to the quantum of economy that is required. For one farm to survive, it needs to have in place a range of other farms around it to make it work. Take agronomists, for example. Agronomists are not going to appear in town for one farm.