Mitch Fifield (Victoria, Liberal Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Minister for Finance and Deregulation (Senator Wong) to questions without notice asked by Senators Cormann and Edwards today relating to the minerals resource rent tax.

Minister Wong did not answer in any way, shape or form Senator Cormann's question as to whether the MRRT had raised any revenue in the first quarter of the financial year. This came as a surprise to me for a couple of reasons. The first is that Minister Wong is actually one of the more able senators opposite, not that that is something recognised by the South Australian branch of the Australian Labor Party—Senator Farrell is in a category all of his own. So I was surprised, given Senator Wong's manifest capacity, that she did not answer the question. The other reason I found it surprising is that Senator Cormann actually wrote to Senator Wong about this this morning. Senator Cormann enjoys a very courteous and cordial relationship with Senator Wong and that was in evidence again today when he extended the courtesy of providing Senator Wong with notice as to what he would be asking. That is the kind of guy that Senator Cormann is and it represents their special relationship.

Given Senator Wong is extremely capable, given Senator Wong had notice of the question in relation to the collected revenues for the first quarter of the financial year, the only reason there can be for her failure to answer the question is that she chose not to. She chose not to share what she knows with this chamber. The whole basis of our system of question time and accountability is that the Senate asks questions and ministers answers them. She chose not to answer the question. We can only surmise as to why she took that decision. The only reason I can come up with is sheer, unadulterated embarrassment. She would have been embarrassed, and quite rightly, with the answer. We have a fair idea of the answer to that question: was any revenue collected by the MRRT in the first quarter of the financial year? The answer is no. That would be a great embarrassment and that is why Senator Wong could not answer that question, with a face that was straight or otherwise.

It is important to cast our minds back to the genesis of this fiasco we have been witnessing. The genesis was of course the Henry tax review. The entire body of work by Dr Henry was ignored except for a bastardised version of what Dr Henry proposed in relation to the minerals resource rent tax. The first incarnation of that tax was the RSPT, which cost Mr Rudd his job. Mr Swan, who was the architect of the RSPT, got a good deal out of that—he got promoted to Deputy Prime Minister.

Ms Gillard cited the resurrection and the rescuing of the mining tax as one of her three key performance indicators when she assumed the role of Prime Minister. She did not succeed and Treasurer Swan, newly promoted Deputy Prime Minister Swan, not only made a hash of the RSPT; he also outdid himself with the MRRT. It was a unique achievement and I think it is important for the Senate to acknowledge that. He spent the proceeds of a tax that collected no revenue and, at the same time, imposed additional costs and uncertainty on the mining industry. He spent the imagined proceeds of a tax that raised no revenue but which hit industry through compliance costs and the undermining of uncertainty. That is a unique achievement which I think deserves to be acknowledged. This breathtaking incompetence is bad enough—and that breathtaking incompetence in and of itself requires that Mr Swan resign; if he had any decency and if he paid any attention to the most basic tenants of the Westminster parliamentary accountability, he would resign—but, even worse, are the endeavours to hide the true situation through the MYEFO. That is a story for another day and I am sure some of my colleagues will touch on that. (Time expired)

Lisa Singh (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

To respond to Senator Fifield, Minister Wong did answer Senator Cormann's question. Senator Fifield and those opposite clearly just did not like the answer that was provided by Minister Wong because it did not fit with their headline-making strategy and with the press release they had ready to go out. The answer that Minister Wong provided outlined the fact that the first MRRT instalment was only actually due a few days ago.

She also outlined that Treasury will therefore provide the final numbers to the government once they have complied with their legal obligations and completed their analysis. She informed the senator that, consistent with the ATO privacy provisions, ministers will not receive any information about individual companies and that the government will then release information on resource tax collections each month in the normal way, commencing from the October monthly financial report that is due out in December and subject to the same taxpayer confidentiality rules that have long applied, including when those opposite were in government.

So those opposite need to understand and realise that the minister has answered the question but it is simply not the way that they intended to hear the answer, because it did not fit with their headline-making strategy. They also need to take a breath and remember how it worked once upon a time when those senators were in government to understand the process that is involved through Treasury and through the government releasing those resource tax collection figures each month. They take a couple of months and will be provided in December.

But senators opposite did not want to hear that from the minister at all today because senators opposite do not like the Minerals Resource Rent Tax. They do not like it because they know that it delivers good things for Australian families. It delivers a shared increase of those profits that come from the resources that can only be dug up once, which Australians understand. Those opposite simply do not like the nature of that tax. We have said for some time that this is very much vital economic reform for this country. It very much does build on the tax review and a long process of consultation across this country.

Australians know how important the mining industry is but they also know that we can only dig up our resources that are in the ground once. Therefore, a profits based tax which is much more efficient than state royalties is a way we can tackle this issue. By putting in place a profits based tax, we can get a better return on our resources when prices are high and their values increase. That is why we have put this tax in place. When prices and profits go up, so do revenues. When prices and profits go down, so too do revenues. That is the whole point of it. It is fairly simple to understand.

Opposition Senators:

Opposition senators interjecting—

Lisa Singh (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

As a result, the MRRT revenues were written down in the MYEFO due to the large unexpected drop in commodity prices. Senators opposite know this very well—or I at least hope that they are aware of this—and yet they continue to choose to play politics on this issue because it does not suit their headline-grabbing strategy. They know very well we had an unexpected drop in commodity prices which included a massive 38 per cent drop in the iron ore price between budget and early September. And so the MRRT revenues are down. But this is no different from the PRRT, and senators opposite should know that. It has now been around for some 25 years and is a volatile but important source—

Opposition senators interjecting—

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Order on my left! Senator Fifield was heard in silence. Senator Singh, you have the call.

Lisa Singh (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

For Senator Fifield's benefit, I will spell out that it is the petroleum resource rent tax so that he is fully aware and educated during his taking note. But of course the PRRT has been around for 25 years and has also been a volatile but important source of revenue— (Time expired)

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

We have just had a speech here from Senator Singh that reinforces what Senator Fifield had to say about Senator Wong's alleged answers to the question. Let's go back to what happened in question time. There was a refusal to answer whether or not the mining resources rent tax had raised any money. Then from Senator Edwards there was a refusal to actually release or concede any talk about what impact the assumptions about prices for iron ore and coal would have upon the MRRT. But I have to address a couple of points that Senator Singh raised there.

Senator Singh raised the false comparison between the MRRT and the PRRT. There is a very big difference: the PRRT is for petroleum that is taken out of Commonwealth territory, for which no royalties are extracted, unlike the minerals this government is attempting to levy an additional tax on, which are already taxed at the state and territory level.

We keep hearing from this government that somehow royalties are less efficient. In some cases they may be, but it is not a black-and-white issue. This government has, if anything, made royalties more efficient. Up until last week and ongoing over the course of this tax are mining companies throughout Australia spending millions upon millions of dollars on accountants' fees, auditors and lawyers merely to determine whether they have to pay nothing—merely to determine that they do not owe the government a single cent, which is what is happening today. If anything, that is making it more inefficient because royalties are a simple, transparent tax levied upon volumes and occasionally prices. One thing this government does not want to admit is that we do have price-sensitive royalties. It is very simple to know how much you owe a government in royalties: it is simply how much you have dug up out of the ground and sold. Only this government with their Greens cohorts in the corner could develop a tax that turned into an accountant and lawyer employment scheme but delivered the Commonwealth no revenue whatsoever. This got through on your vote, Senator Di Natale. It got through on the Greens' votes.

This goes to the core of what this mining tax was about. It was about a seizure of state revenues. What this government will not tell you when it talks about spreading the boom is that the royalties levied by state governments are entirely appropriate. They pay for teachers, nurses and the hospitals we heard Senator Evans talk about. The Commonwealth wants to seize control of those mining revenues and have them at its own disposal. Every state in the federation, through the horizontal fiscal equalisation measures, benefits from Western Australia and Queensland increasing their royalties. Within three years, the people of Victoria will be receiving a higher share of GST revenue precisely because Queensland and Western Australia have increased iron ore and coal royalties.

That is the way the system is meant to work. Horizontal fiscal equalisation keeps royalty revenues within the ambit of the state and territory parliaments. They are the revenues that pay for our roads and our public transport. Yet what we have from this government is an attempt to seize those revenues because it does not want to support state governments doing such things. It would prefer to be able to have announcements of its own and dish out the money, using it as a form of patronage rather than allowing the states and territories to be autonomous in what they do. The royalties are precisely in the rights of the states in order to protect their financial independence and, no matter what construct this government comes up with, no matter what class war it invents, running around and saying it wants to spread the benefits of the boom, and no matter what slogan it comes up with, those benefits are already being spread. Those benefits are being used today by our state governments in paying for those services that are so critical to many of our citizens.

We do need to look at the antecedents of this tax. This tax was based on the failed and flawed RSPT model, which was itself, to quote Senator Fifield, a bastardised version of what was outlined in the Henry review. It was nothing less than an attempt by the Commonwealth to effectively seize equity in our resources industry—

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

A grab for cash.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

It was a grab for cash—thank you, Senator Cormann—in order to plug a budget deficit and it actually exposed the Commonwealth to substantial liability. What the government will not admit either is what liabilities the government has now against future revenues of the MRRT because of the credit being given for payments for state royalties. This tax is a debacle. It symbolises the complete failure of this government to do the most basic economic tasks. (Time expired)

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

It is always interesting to follow a coalition senator when they make some grandiose statements, and you look around and see some of their colleagues looking at their feet in absolute embarrassment. I am sure the senators from Western Australia were not supporting Senator Ryan—

Michaelia Cash (WA, Liberal Party, Shadow Parliamentary Secretary for Immigration) Share this | Link to this | Hansard source

Your colleagues aren't even here!

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Well, that saves me being looked at in embarrassment, Senator Cash. I will not have the same embarrassment that Senator Ryan engaged in, even if indeed my colleagues feel the need to do so. Running the line that state based royalties imposed by Queensland and Western Australia will actually improve the GST take from Victoria is something Victorians might appreciate, but I am sure Senator Back and Senator Cormann are probably a little bit more concerned about that than you, Senator Ryan.

Nonetheless, let us talk about Senator Ryan's closing comments about where the efficiency of these taxes lies, and let me make this very clear to anyone who is listening. A decade ago, the Australian people received $1 back on every $3 made from our natural resources—the natural resources that are owned by the Australian people. Those resources are licensed to large companies to extract, but the resources themselves are owned by the Australian people. A decade ago, the Australian people got $1 back for every $3 made from our natural resources. In 2010, that figure had dropped to a $1 return on every $7 that the industry made from those resources.

What this government quite rightly tried to do was to reform that tax base system and move it away from a volumetric tax, where people started paying tax in a royalty situation—a very inefficient tax. They started paying tax for the extraction of stuff from the ground instead of it being based around the profits. As companies grew and developed those resources and made super-profits, that was when the money should have flowed back to the government to be used on behalf of the Australian people, not the other way around. You should not tax people upfront. It was an inefficient tax and I think most people, when they are seriously engaging in this debate, concede that moving to a profit based tax system is a much more efficient way to tax companies than the volumetric or royalties system that this tax has replaced.

Let us ask the question: what are the opposition actually saying here? Is the government being criticised because mining companies super-profits are too low or is it because they are not being taxed enough? It is a very confused message that we over here get from the coalition when they say, 'The problem is that the tax did not raise enough money,' when all their argument for the last 12 months has been that they are going to repeal this tax, it is a terrible tax and it is going to drive industry out of business. It is an absolute nonsense. I am sorry Senator Cormann has left, because we are actually taking note of answers to questions he and Senator Edwards asked, and I want to quote what Senator Cormann said on 19 March 2012. He said:

We have a high-spending, high-taxing government that, rather than wanting to support those parts of the economy that need help, wants to slow down the fast lane.

So which is it? Is the government taxing too much, or not enough? I ask Senator Cormann: 'Which is it? What are you criticising the government for now?' A super-profit tax, as we know, only applies when super-profits are being made, so what is his problem? Is he saying that we should be taxing lower profits, or is he saying we should be taxing whatever profits those companies make? He really cannot have it both ways. There is no clear or concise message or criticism coming from the opposition on this at all.

Only two months ago, on 23 August 2012, Senator Edwards, one of the others asking questions today, was blaming the carbon price and the minerals resource rent tax for the decision by BHP not to proceed with the expansion at Olympic Dam in his home state of South Australia. But the very next day the chief executive of BHP, Marius Kloppers, was telling journalists that the carbon tax and the minerals resource rent tax had nothing to do with that decision. So here we have another example of coalition senators getting up and saying whatever they like because they will say and do anything to try to undermine good government policy and the introduction of it. Like Mr Abbott, Senator Edwards has absolutely no credibility on this issue. The coalition have no credibility on this issue, and they support every Liberal state government putting up the tax that they criticise— (Time expired)

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

In her answer, Senator Wong drew attention to gambling and the Spring Carnival—about the only sensible thing she did say—and that reminds me of the famous trifecta of Prime Minister Gillard.

She came to the prime ministership saying that she was going to solve three major problems. The first was asylum seekers. As of the weekend, there were 21,419 of them on 335 boats. This is someone who, when she was shadow minister, used to put out very rare media releases saying 'Another boat, another policy failure'. The second leg of her trifecta was the carbon tax. She went on to say, prior to the last election, 'There will be no carbon tax under a government I lead.' But the best leg of the trifecta, naturally, was when she fronted up with her Treasurer and Deputy Prime Minister, Mr Swan, to try and solve the minerals resource rent tax problem. The best way to summarise that is to say that the two of them were BHP-ed off, they were Rio-ed out and they were Xstratified. Those two thought they were going to be able to deal with the might of those three multinational companies and come out in front, and we have seen the result of that. Needless to say, it has hurt—as we all said it would at the time. In case Senator Marshall is listening, we said it was going to hurt the Australian owned mid-cap and junior miners. The Atlas Iron managing director, Mr Ken Brinsden, said:

We have spent the best part of $2m in compliance to find that we are not paying the tax and that we wouldn't reasonably expect to pay the tax under almost any circumstance you can imagine as we go forward with the iron ore price.

That was echoed by Mr Simon Bennison, the CEO of AMEC, when he said much the same thing, that this was only going to hurt the juniors.

As Senator Brandis said to me a few moments ago, not only did the minerals resource rent tax bring in no revenue; the simple fact is that, because all of these accounting costs and other costs are tax claimable, it is a fair argument to say that, perversely, the jolly thing is actually going to bring in less revenue for the government by way of company taxes.

Mr Rod Henderson, KPMG's national tax leader in energy and natural resources, drew attention to several problems associated with this new tax. First of all, it changes the way the major companies keep records. He said, 'People have to do all this work on a project basis and normally records aren't kept on a project basis.'

So we have example after example of where the failed government failed to listen to Australian companies. They were absolutely done over by the three major multinationals, and the result was that not only did it not bring in any revenue in the first quarter; the government actually pre-spent everything they thought they were going to get—a great tragedy and typical of Labor governments.

Senator Marshall suggested that mining companies do not pay their fair share. In the few minutes remaining to me, I want to put that to rest. The argument that mining pays a low percentage of its income in taxation is not true. The argument that mining pays a low proportion of total corporate tax is not true. They are the second-largest contributor to corporate income tax in this country, after the financial and insurance services sector. The interesting thing about the mining companies is that they paid 28½ per cent tax in 2009; whereas, the financial and insurance services sector paid less. It paid 21.8 per cent tax.

The mining industry in this country is a massive contributor to our economy; 60 per cent of all capex is spent in buildings and structures in the mining sector. It is contributing $140 billion to $150 billion to our economy. It is seven per cent of the Australian economy. We on this side of the Senate have continually said to the government: 'Why would you try and take from the very sector that is creating employment, creating wealth, creating need and creating demand, using up some of those lost 60,000 jobs in manufacturing that we have heard about around Australia?' There is no case for this activity, and the revenue from the minerals resource rent tax is what the government deserved. (Time expired)

Question agreed to.