Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

The committee is considering the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 as amended, and amendment (1) on sheet 5489 by Senator Milne.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Last night we were having considerable discussion about this and I asked the government to tell me where in the legislation, as it currently stands, it says that these forests cannot be cut down. It is a simple request. Where does it say that? That is the first thing. The second thing is that people have said to me today: ‘Oh well, doesn’t this mean that people could go out and plant forests on degraded land? Wouldn’t that be a good idea?’ You only have to look at managed investment schemes to see that the same thing was said about them in the first place. The fact of the matter is that, if you invest in an MIS or a carbon sink forest, the value of your investment depends on how rapidly those trees grow. If you want to cut them down for plantation fibre then the faster the growth and the quicker the rotation, the more money. If you do not want to cut them down and you want to have them as a carbon sink then, again, the faster they grow, the more carbon you have got to sell in the carbon market.

This is a double dip. For anyone who actually gets the tax deduction and then wants to go into a voluntary carbon market—in the absence of a legislated market—then, the faster your trees grow, the more carbon credits you have got to offer. So exactly the same thing will happen with this as has happened with the MISs—that is, the better the agricultural land, the better the trees and the more water, the better the trees grow. Therefore, it will not lead to trees growing on marginal land and, if you were genuine about marginal land, you would be supporting my amendments, particularly the first one, which states:

... the trees are a mixture of species that approximate the local native vegetation or, if not available, from an ecologically similar location ...

If you are genuine about marginal land then the best hope you have got of growing anything on marginal land is to grow what was there in the first place. That is not going to happen when the value of this investment depends on the volume of carbon credits you can sell in a market or, if you chose to cut them down, the amount you can get on the woodchip market. That is a nonsense.

Another statement is, ‘Oh, isn’t this about poor farmers wanting to reafforest?’ No, it is not. Let me give you an example. Virgin and Qantas are under the hammer because of their aviation emissions. They know they have to count their domestic emissions and their international emissions will be counted under future schemes. Already, people like the Greens senators, for example, are paying a business to offset our emissions from aviation. But the big companies will be wanting to do that as well.

We senators decided not to invest in any company that plants trees but rather that produces renewable energy because that is actually reducing emissions now, not cost-shifting it to the future where the trees may or may not grow, may or may not take up anything like the carbon that will be emitted from a flight over the time frame we have got. As I said last night, the issue is the time frame. Under this scheme, Qantas or Virgin could institute a system of passengers paying a levy for carbon offsets going to Qantas or Virgin bank accounts. They could use that money to purchase land and establish plantations and then come to the government with their hand out and say, ‘Now we’ll have a tax deduction.’ This is not just for coal companies; this is for any big business wanting to offset.

The world made this mistake with the Kyoto protocol when it allowed financial credit for afforestation and reforestation but no credit for protecting standing forests. That is where the world went wrong. Everybody acknowledges that now, and so, in the negotiations for post 2012, everybody is talking about the REDD scheme—reduced emissions from deforestation and degradation. We want to shift internationally the benefit to the people who are protecting standing carbon stores, not setting up rorts for other people.

Firstly, I would like to ask Senator Conroy to point out specifically where in the legislation it says these forests cannot be cut down, especially if you claim the tax deduction up-front but even if you do not over 14 years. Secondly, I would like him to explain how he is going to keep these forests, these plantations, off prime agricultural land and, therefore, how he is going to stop them buying up the water rights that farmers are currently competing for and how he is going to prevent the same perverse consequences that have happened with managed investment schemes for rural and regional Australia where farmers have been driven off their land and communities have collapsed. I would like a particular reference to those two matters.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

This is the information with which I have been provided. The tax law is not the appropriate mechanism for ensuring a carbon sink forest is maintained until mature and thereafter. The tax law is a mechanism for raising revenue, not a mechanism to regulate the growing of trees. The tax law does not have penalties for the destruction or removal of other assets where the taxpayer has previously claimed a deduction. The treatment of the destruction of a carbon sink forest should be dealt with under other environmental frameworks. The legislation does not allow a deduction if the intention of the taxpayer is to fell the trees.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

That was a complete duck on the question that Senator Milne put to the minister through you, Chair. The question remains: if it is to be dealt with somewhere, where has this matter been dealt with? Will the minister bring forward to the committee the government enactment of law or regulation which requires that, if taxpayers are going to forgo millions of dollars which could otherwise go to addressing global warming or assisting public education and public health—we are dealing with a massive amount of money here—the trees planted here, for which wealthy corporations taking over farmlands are going to get millions of dollars in tax deductions, have to stay in the ground accreting carbon?

This bill has schedule 3 labelled, ‘Capital expenditure for the establishment of trees in carbon sink forests.’ Carbon sink forests appear throughout the schedule, as you will see—even conditions for deducting for establishing trees in carbon sink forests. But then you find there are no conditions for ensuring that the carbon sink keeps the carbon. Senator Milne’s motion, amongst other things, requires that the trees are there for at least 100 years, which one would have thought was a minimum requirement if we are looking at keeping the carbon out of the atmosphere. But, no, this legislation will allow people to get massive tax deductions up-front and, 15 years after they have planted the trees, to cut them all down again and get the deductions again for planting another lot. They can be burnt and put into the atmosphere.

It is irresponsible legislation and I know that the vested interests have been hard at work overnight on the government and opposition to ensure that this legislation goes through, because it is not a carbon sink mechanism; it is a tax avoidance scheme we have in front of us. It is extremely concerning because when the government gets into green wash like this—that is, using up-front a motivation to create carbon sinks which is not genuine to say the least, to afford vested interests who are behind this legislation massive tax deductions—it is engaging in deceit and a studied deceit at that.

Senator Milne asked where in this legislation it stipulates that you have to keep the trees in the ground for a certain period of time, any period of time. It is missing. The minister’s answer is not acceptable. He gets up and says, ‘Yes, we have provision here for carbon sink forests in this tax legislation,’ but it is about taxes; it is not about carbon sinks at all. You have to go somewhere else if you want to find out about carbon sinks. Well, why label it carbon sinks? This is simply a rort. This is a rort whereby investors are going to get massive tax deductions at the expense of the Australian economy to plant trees, which will not provide the purpose for which they are meant. They are not going to be carbon sink forests. In fact, if you are looking at this from an investment point of view, it would be crazy to keep your trees there when every 15 years you can get the tax deduction again. You would be crazy to keep them for a hundred years. Who would do that?

The other argument that comes down the line is: ‘We don’t have carbon trading yet and so who is going to invest in this scheme when they don’t know what the value of the growing trees is going to be?’ Well, it is like all other market enterprises. If you want to get this tax deduction for a carbon sink—and that is the aim of the legislation—you keep your trees in the ground for 100 years. The problem comes when it turns out, against all expectations, that forests are excluded from carbon trading down the line. The government has not created the provision for carbon trading; it is bringing this legislation in first. It has put the cart before the horse.

My advice to investors, if Senator Milne’s amendment gets up, is to wait until you see what the government’s legislation is going to be—and it is an urgent piece of legislation which we should be seeing first. This is all back to front. It is a rort. It is going to transfer millions of dollars, otherwise collected for the public good, into the pockets of investors at the big end of town who are in this for a tax deduction. They are not in this for a carbon-sink provision. There is no requirement in this legislation for that. As Senator Milne says, this is managed investment schemes on steroids. That is what this is. When rural Australians get to see this they will see their land, including land for food production, taken over because this rort allows tax deductions for corporations at the big end of town who want to get out of their responsibility for offsetting their greenhouse gas production. Senator Milne’s amendment at least stipulates that you have to keep these trees in the ground for 100 years—that is, that you are going to be dinkum if you are getting this tax deduction. The opposition should be supporting it and the government should be supporting it. And, if you don’t support it, you are not dinkum about this legislation either—you are simply providing a facility for big investors to rip off the tax system.

Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

I do want to make one comment at the start, which I am sure Senator Conroy would join me in. For Senator Brown to say that this was an overnight consideration to protect vested interests is, quite frankly, an utter insult. In good faith, you came round to me last night and said, ‘Can we defer this overnight so it can be reconsidered and can be looked at?’ For you to come in here today, with the greatest respect, Senator Brown, and accuse the government and the opposition of delaying this overnight to protect vested interests is, quite frankly, a personal slur to us as individuals and to both parties, and I think you should apologise. When this matter could have passed last night, when we had already dealt with three amendments and only had two amendments left, you came up to me and asked whether we were prepared to put this over, when the legislation would have been finished 10 or 15 minutes later. You asked us to put this over and we agreed, in good faith, to do that, to reconsider it and see whether, with consideration overnight, what you were saying was indeed correct. That was done in good faith by the government and by the opposition. To come in here today and say this overnight consideration was to protect vested interests is, quite frankly, bitterly disappointing. It was done in good faith, and quite frankly, Senator Brown, you have abused that good faith today.

I am mindful that in some three of four minutes we are going to have to do something with this, but I do want to place on record, if you like, with some formality, the opposition’s position in relation to this matter and why we will be supporting the government’s bill and opposing the Greens’ amendment. We have, again, considered this overnight. In fact, Senator Brown, we were probably meeting until midnight—I think it was about then when I left one of the shadow minister’s offices last night to make sure you and some other senators in this place who had some concerns about this were comfortable that what we had decided to do originally was still appropriate. After many hours of consideration, not to protect vested interests but to actually accommodate the request that we had from you and other senators, we came to the considered view that our position, which was of course that of when we were in government, has not changed and that we will be supporting the government in this regard.

I want to place on record the policy rationale for the former coalition government’s introduction of this measure and the basis for the coalition’s agreement with the government’s decision to remove schedules 2 to 6 from the Tax Laws Amendment (2008 Measures No. 2) Bill 2008, which was passed last week. Some concern was expressed that it might be possible under these arrangements for an upfront deduction to be made available for a forest that is cut down and sold as timber. Currently, anyone who wants to grow trees for timber can get upfront deductions which are widely available, including to MISs. The carbon sink forest deductions are not available to MISs. Furthermore, in order to get the carbon sink deduction, the taxpayer has to comply with a whole series of elaborate requirements including getting the approval of the Department of Climate Change.

Some senators have also queried what would happen if someone decided to cut down the trees after receiving the up-front deduction. A taxpayer who does that runs the risk of being accused of not having had the requisite carbon sink purpose and therefore logically attracts the interests of the deputy commissioner. But assuming that that person did have the original purpose and the appropriate purpose and then changed their mind and cut down the trees, what has actually been the gain to that person? Let’s say that person invests $100 in these trees and gets a $30 deduction. If they then sell the carbon credits to someone else, they have a contractual obligation to keep the trees in situ, probably for a lengthy period, typically 80-plus years. Let’s assume that, for one reason or another, they cannot sell the credits and decide, as was suggested in the Senate last night, to cut the trees down and plough them back in. In that case they have, effectively, wasted $70 after tax. They started off with a clear paddock and $100 in their pocket. They have spent $100 on the trees and they have got $30 back from the government— (Time expired)

Progress reported.