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representatives vote 2014-06-26#3
Edited by
mackay staff
on
2014-06-27 10:47:14
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Title
Bills — Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2]; Consideration in Detail- Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2] - Consideration in Detail - Agree to the bill
Description
<p class="speaker">Andrew Leigh</p><p>The House Economics Committee held an inquiry into the Minerals Resource Rent Tax Bill when it came before the parliament. As part of that inquiry we interviewed Mr Julian Tapp, from Fortescue Metals Group. I asked Mr Tapp about the corporate tax paid by FMG, then a $20 billion company. My question to him was: 'In terms of corporate tax paid, it would not be correct to describe Mr Forrest as a taxpayer, would it?' The response was: 'Mr Forrest is not a company. Fortescue Metals Group is a company.' I then said: 'But, as things currently stand, it would not be correct to describe'—and the reply from Mr Tapp was: 'We have not cut a corporate tax cheque to date, no.' So FMG, despite describing itself as a taxpayer, was not at that point a corporate taxpayer.</p><p>It was in that context that Labor put in place the minerals resource rent tax—a tax which recognised that, from the early 2000s up until the height of the boom, the share of mining profits returned in tax had fallen from one dollar in three to one dollar in seven. Indeed, it was the Minerals Council of Australia itself that went to the Henry review and put forward a submission arguing for a profits based tax. The Minerals Council of Australia did so not because it is a secret communist haven but because the Minerals Council of Australia recognised, as did so many serious economists around the world, that profits based taxation is a fairer form of taxation.</p>- The majority voted in favour of a [http://www.openaustralia.org/debate/?id=2014-06-26.109.14 motion] to agree to the bill.[1] This means that the majority agree with the bill as it stands and that they can now vote on whether to read it for a third time and therefore pass it in the House.
- ''Background to the bill''
- The [http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5300 bill] was introduced to repeal the [http://en.wikipedia.org/wiki/Minerals_Resource_Rent_Tax minerals resource rent tax] ('MRRT'), which the Coalition called the “mining tax”.[2] The tax began 1 July 2012 and applies to profits earned from the extraction of mineral resources such as coal and iron ore. Its abolition was an election promise of the Coalition during the 2013 election campaign.[3]
- The bill also repeals the [http://www.dss.gov.au/our-responsibilities/families-and-children/benefits-payments/schoolkids-bonus schoolkids bonus], the [http://www.humanservices.gov.au/customer/services/centrelink/income-support-bonus income support bonus] and the [http://www.ato.gov.au/Individuals/Super/In-detail/Contributions/Low-income-super-contribution/ low income superannuation contribution].
- This is the second time a bill implementing these measures has been introduced. Earlier this year, the [http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5142 Minerals Resource Rent Tax Repeal and Other Measures Bill 2013] was rejected in the Senate.[4]
- ''References''
- * [1] Read more about the stages a bill must pass through to become law [http://www.peo.gov.au/learning/fact-sheets/making-a-law.html here].
- * [2] You can read more about the MRRT [http://www.ato.gov.au/Business/Minerals-resource-rent-tax/ here].
- * [3] You can read the Coalition's policy [http://liberal.org.au/our-plan/5-pillar-economy here].
- * [4] See that division [http://publicwhip-test.openaustraliafoundation.org.au/division.php?date=2014-03-25&number=2&dmp=14&house=senate here].
<p>Let us be honest, the way in which royalties have been administered since the start of the boom has had a profits-based sense about it. Queensland and Western Australia have increased royalty rates as the world price has gone up and they have done so because they have recognised that the rise in the world price is not due to the ingenuity of our miners. Australian miners are ingenious and have put in place a range of new technologies that are at the cutting edge of minerals extraction, but they are not responsible for changes in the world price of iron ore, which has gone up to a large extent due to increased demand, principally in China but also in India.</p><p>Honourable members: Korea.</p><p>And Korea, I hear an honourable member interjecting. The increase in that world price ought to be captured in part by Australian taxpayers—and it has been through the increase in royalties—and a profits based tax represents that principle. That is why the Minerals Council of Australia asked the Henry tax review to consider a profits based regime. That is not a controversial notion around the world. A little known politician by the name of Sarah Palin made her name as Governor of Alaska championing profits based taxation. She did so because, as she argued, profits based taxation was the right solution for Alaska.</p><p>When Australia put in the petroleum resource rent tax in the late 1980s, there was much ado about it. Over two decades later the petroleum resource rent tax has brought billions of dollars of revenue into Australia, and it has done so through the principle of profits based taxation—a fair and reasonable principle, grounded in sound economics, recognising that scarce minerals can be extracted only once. On the principle of equity we should support it, but not just on the principle of equity. A profits based tax should be supported on the Burkean grounds that many of those opposite would champion. Edmund Burke took the view that we are here not just for the generations of today but informed by generations gone and inspired by the needs of generations to come. Generations to come will not thank us if we do not ensure that minerals extraction is done at a fair rate of tax—not an exorbitant rate of tax, not a rate of tax that shuts down the industry, but a rate of tax which over recent years has seen expenditure on private minerals exploration go from $5.7 billion in 2009-10 to $7.8 billion in 2012-13.</p> <p class="speaker">Melissa Price</p><p>I am pleased to speak on the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2], which is of acute importance to my electorate of Durack, which incorporates the Pilbara, mid-west and Kimberley regions, the town of Port Hedland and the remainder of the great mining province of the north-west. Mining, primarily of iron ore, is critical to the economy and to the wellbeing of the people of Durack and of the Australian nation. We are all well informed of the impact of additional regulatory burdens introduced by Labor on the sustainability of the mining industry, as we have seen companies choosing to reduce their investment or move offshore as a consequence of an uncertain and irresponsible policy regime introduced by Labor. These companies have chosen to pursue their activities in an environment where they have determined there is less risk and greater support for their endeavours. We must reverse this impression and restore confidence to ensure growth, development and sustainability of Australia's great mining and resources industries.</p><p>Those opposite say we should all share in the spoils of mining. That is a matter of opinion but, if that is what Labor intended, they have failed miserably to achieve that objective, as history has shown. This is typical of Labor—create an ill-conceived tax that raises little revenue but commit to spend money that it hopes, wishes and prays will somehow be available to fund their commitments. Is it any wonder that Australians are now lumbered with a $1 billion monthly interest burden, which mostly flows overseas, and we are now using a credit card to pay the interest on the credit card? So this government is left to fix the economy and return confidence to the Australian people. Repeal of the MRRT and associated expenditure will improve the budget bottom line over the forward estimates.</p><p>The sovereign risk associated with the misguided MRRT is clear to even the doubters. As we have witnessed, it deterred investment and forced even Australian companies offshore to invest in places like Africa. How ridiculous! It is quite something when mining companies start to think it is easier to do business in Africa. How embarrassing! The repeal of the mining tax will have a pivotal impact on the perception of international investors, leading towards restored confidence. The importance of this cannot be overstated.</p><p>Let us look at this very sad and sorry history. The original tax, promoted by Labor as the resources superprofits tax, was calculated by Labor to raise more than $40 billion over five years. It has been more like the superdud tax. In 2010, with the introduction of the MRRT, this was calculated down to $26.5 billion and then again to $16 billion. As we all know, a net of just $340 million has been raised by fewer than 20 taxpayers, whilst another 145 miners have been required to produce their MRRT instalment notices.</p><p>Having worked in the iron ore sector in Western Australia, I know firsthand that the regulatory burden of the mining tax cannot be overstated. Even though there are only a few companies that, as it turns out, had to pay the mining tax, there are numerous other mining companies who employed staff to comply just with the MRRT legislation. Because of the complexity of this legislation, mining companies around Australia were employing expensive accountancy and legal firms to provide them with an understanding of just what this mining tax meant to them. As we now know, in the end the time and cost taken to understand and comply with this ill-founded legislation was all for nothing, given it raised so little revenue for the Australian people, and it could have been spent on more productive aspects of a mining business.</p><p>Getting rid of this ill-thought-out tax will see mining companies around Australia breathe a sigh of relief, confidence restored and foreign investors having faith that Australia is back in the hands of the adults. The repeal will have a significant impact on administration and compliance costs—indeed, millions will be saved by small, medium and large entities. Clearly, the matter was not given due attention by Labor. It was not thought-out, verified or evaluated. This is an appalling approach to doing business. We must repeal this tax and its associated encumbrances and costs.</p><p>I am very passionate about this issue. I was born in Kalgoorlie and experienced the booms and busts of the gold and nickel industries. It is not always easy to make a quid out of mining. For Labor to make it harder for mining companies and, by extension, the good people who live in these mining towns is plain irresponsible. Today I stand here not as the girl from Kalgoorlie but as the representative of Durack, which of course is the economic and mining powerhouse of Australia. Let us put it in perspective: Western Australia contributed, in 2012-13, 58 per cent of all mining outputs and 97.5 per cent of the total iron ore produced. One other statistic just to finish off is that in Port Hedland we see that it is anticipated that some 350 million tonnes of iron ore will pass through that port in a financial year, and some 400 million tonnes is well within its sights. Western Australia is significant, and it can only get better once we get rid of this tax.</p> <p class="speaker">Russell Broadbent</p><p>I thank the member for Durack. I have not heard the line 'it's hard to make a quid' for a long time.</p> <p class="speaker">Alannah Mactiernan</p><p>And certainly, Mr Deputy Speaker, you would not have heard it in relation to the iron ore companies in Western Australia, which have certainly been doing very well. It is with pleasure that I take this opportunity to get up here and speak on the mining tax and the reason why I support very, very strongly the fundamental principles of a resource based tax. I have been grossly verballed by the other side from time to time on this matter, and I want to just take this brief opportunity to set this out.</p><p>There is no doubt that, when you look rationally at the taxation system and the best way to bring to account the value for the Australian community out of the resources industry, it is as the Henry tax review says. It says that we should replace the current royalties based system with a uniform, rent based tax, legislated for and administered by the Australian government. I agree with that. And that, indeed, was the position that was put by the Minerals Council in their submission informing the Henry tax review. I want to make it very clear that I totally support that principle of a resource based tax.</p><p>I guess my view is that I do not think that you can put this just on top of a royalties regime. I think that, if we are going to solve this problem, in the long term we need to work with the states and to come together with a composite and uniform system, which was indeed the vision of the Henry report. I think that must be the way that we go down.</p><p>But I want to address this nonsense that we hear from the government all the time that somehow or other this tax has been bad for Western Australia. I can set out why it has not been bad for Western Australia, but I also just want to make sure that I get this opportunity to acknowledge that I think that really, fundamentally, Labor lost the public relations battle on this one. So, when after the 2013 election I suggested from time to time that I thought it was time to let it go, it was not that I in any way thought that this tax was an improper tax or that this tax had in any way curtailed the development of Western Australia. I do not believe it did, and I am very confident that it did not do that.</p><p>I just want to give some facts associated with this. Let us have a look at iron ore production in Western Australia. Iron ore production in Western Australia in 2011, when the tax was introduced, increased by 15.9 per cent. In 2012, it increased by 12 per cent. In 2013, it increased by 13 per cent. So we see this massive growth in volume after the introduction of the tax. And we look at the value of iron ore sales. From 2011 to 2013, it went up first by 15.8 per cent and then, in the following year, by 23.3 per cent. There is absolutely no way that this hampered the performance of Western Australia. Rio Tinto's full-year profit was $3.7 billion. BHP Billiton's was $7.8 billion. FMG's half-year profit was $1.7 billion.</p><p>Let me quote here. There was this idea, this nonsense, that the industry was going to wander off and go off to Africa. I want to quote here the report of Dr Stephen Grenville, who is a former RBA member and a former OECD and IMF member. In response to a statement by the then chief executive of Rio Tinto that Australia represented his main sovereign risk, he says this:</p><p class="italic">Now, with some hindsight, the absurdity of this argument is obvious.</p><p>Would Rio have gone elsewhere? He says:</p><p class="italic">Its painful experiences with Riversdale coal in Mozambique, Simandou iron ore in Guinea and Oyu Tolgoi copper in Mongolia were assuaged only by colossal Australian iron-ore profits.</p><p>I put it to you that, on any rational analysis, this tax has not had a negative impact on Western Australia. Am I disappointed that we did not get this right, that we perhaps could have introduced this in a better way? I am, but this tax has not—</p> <p class="speaker">Russell Broadbent</p><p>I thank the member for Perth for her contribution.</p> <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>
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