Kerry O'Brien (Tasmania, Australian Labor Party) Share this | Hansard source

I can indicate to Senator Milne and Senator Xenophon that the government will not be supporting this amendment. The removal of the tax deduction for carbon sink forests is part of the set of arrangements that the government seeks to put in place as measures to sequester carbon in the new ETS and associated measures. The tax deduction proposed provides an incentive for growing forests for specific purposes of taking carbon dioxide out of the atmosphere. We think that this would help to boost the national effort to reduce greenhouse gas emissions, and for that reason the measure is important.

This is an issue which has been trawled over many times in this chamber—many, many times—including through a Senate committee inquiry on this measure which reported in September last year. That committee found that the carbon sink forest tax legislation is:

… a valuable policy addition that will promote greenhouse gas reductions.

That was the finding of the committee.

There has been some discussion in this debate about managed investment schemes, which are quite a different tax vehicle. The managed investment schemes operate in both the forest and non-forestry areas, and frankly they have promoted, in the forestry area, a great many positive forest initiatives. They have seen an increase in available plantings outside the native forest area, to the extent that over a period of time we will see, in my state, the near replacement of native forest chippings with plantation forest chippings. But we are also seeing a transformation in the native forest area from chipping some resources to higher value uses such as rotary veneer peel resources—in other words, peeling some of the trees that would have gone into woodchips to create veneers to manufacture ply for the building industry, a measure which puts those timber resources into a much longer lived wood product, thereby effectively sequestering carbon in that product for a very long period in the building industry. So those sorts of measures, which are spin-offs from the managed investment schemes and the increased wood plantation sector, are arguably already having a positive effect on the amount of timber that is being preserved in the environment in wood products and therefore sequestering carbon over a long period of time.

So to suggest that somehow, firstly, there is something intrinsically wrong with the managed investment scheme—that is, it is not capable of amendment to make it better—is, I think, a falsehood. It is true that there have been some businesses that have operated in a less than acceptable manner in the sector, and they have been very large businesses. It is also true that availability of finance had a significant effect on the timing of those businesses’ demise. Hopefully, many of the resources that they have created will be taken up and managed by better managed businesses so that those types of resource creation projects can continue with appropriate measures put in place by government to make sure that the original intention of the managed investment schemes—that is, the creation of sustainable forest industry additions for the future whilst at the same time providing reasonable investment products for taxpayers—can continue.

That Senate inquiry in 2008, as I said, found that this measure would be ‘a valuable policy addition’ that would ‘promote greenhouse gas reductions’. That report noted that the legislation addressed an anomaly in that other forms of greenhouse gas emissions reduction activities by industries are tax deductible. I ask the question: why would it be suggested that this form of greenhouse gas reduction not be as tax deductible as others, other than, perhaps, as a campaign by the Greens to render the forest industry less economically viable because they oppose it? I really think that it would be an unfortunate circumstance if this particular amendment were carried. The amendment would have the effect of reversing the initial measures which have been put into place and creating an inconsistency in taxation treatments relating to greenhouse gas emissions.

As I said, the proposal has some flaws. I think it is simplistic to put the proposition that, because there have been some problems with managed investment schemes, carbon sink forest arrangements ought not be allowed to continue, bearing in mind that there are measures in relation to carbon sink forest arrangements which do not apply to managed investment schemes. These include the fact that the life of the planting must be a very considerable period of time, that the planting must grow to a particular size and that the removal of that planting would require a restitution in the carbon accounting arrangements that have been put in place to give it a value.

This is a measure which has been reasonably well thought out and was initially proposed by Mr Turnbull, I think. It is a measure that both the then government and the then opposition, now the government, took to the last election. We have made no secret that this would be a part of the arrangements to accompany the proposal to address the Earth’s emissions problems. I think we have been consistent in that. We believe that other countries ought to do more on how they sequester carbon in their forests and that they should make sure that the destruction of forest does not lead to greater greenhouse emissions. Hopefully forests in other areas can continue to be grown and preserved for the purpose of the sequestration of carbon to achieve a better carbon and greenhouse outcome for the world.

So we will not be supporting this amendment. We think that, if you take away the references to the failed businesses in managed investment, the principle is still a viable one and that, despite any criticisms you make of managed investment schemes, this is a different scheme. This is a scheme which equates one form of gas emission reduction activity with others that are tax deductible.