Tuesday, 22 November 2011
Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Petroleum Resource Rent Tax Assessment Amendment Bill 2011, Petroleum Resource Rent Tax (Imposition — General) Bill 2011, Petroleum Resource Rent Tax (Imposition — Customs) Bill 2011, Petroleum Resource Rent Tax (Imposition — Excise) Bill 2011, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, Superannuation Guarantee (Administration) Amendment Bill 2011; Second Reading
As a member of this federal Labor government, it is with quiet satisfaction that I join my colleagues at the end of a difficult but momentous year of reform in order to support the passage of the minerals resource rent tax legislation. This is a Labor initiative. It is about making this country fairer and stronger. It is about sharing the wealth that should be better shared. It is about ensuring that the development of finite mineral resources is translated into wide and long-term benefits for all Australians, and that those benefits are translated into a stronger, more diversified Australian economy.
The minerals resource rent tax which we debate here can be thought of in three ways. First, it is absolutely fair and right for government, on behalf of all its citizens, to make sure that companies and individuals make a fair contribution through taxation to the common needs and shared wellbeing of this country. Mining companies do not own the non-renewable mineral and energy resources they extract; they belong to all Australians, who are thereby entitled to share in the benefits. Second, the MRRT fits within a suite of tax reforms that will ease the administrative burden and costs on low-income taxpayers and on Australian business, especially small business. Third, the proceeds of the MRRT are directed at the long-term financial benefit of individual Australians and of the Australian economy by underwriting a staged increase in compulsory superannuation from nine per cent to 12 per cent.
Over at least the last decade, large and enormously profitable mining companies have not been paying a fair share through their tax contributions at a time in which their use of our mineral resources has returned a veritable river of gold. Against average Australian business profit of 11 per cent, mining companies have in recent times averaged profit of around 36 per cent, while large mining companies—with more than 200 employees—have averaged around 47 per cent.
The vast majority of economic analysts and even most mining sector participants have acknowledged that an increased tax on profits calculated at the point of extraction is entirely fair, efficient and reasonable. What is more, it is absolutely necessary if we are to create the capacity to deal with the critical issues that confront us in the areas of aged care, disability funding, infrastructure and the support needed for innovation and manufacturing.
Over the last decade, and through some very difficult economic times, mining companies in Australia have been providing a very significant source of export income, a very significant focus for investment, and a very significant number of jobs. This is more true in Western Australia than anywhere else—and, as a Western Australian, I applaud the sector for its performance and for its contribution to Australia's economic resilience. But we must keep things in perspective. Mining jobs represent less than two per cent of all jobs—and even in WA they represent only about five per cent. Last year, the understandable but not always honourable resistance to fair taxation by some hugely profitable miners, gave many Australians the impression that the resources sector rescued this country from the global financial crisis. Yet very little mention was made of the fact that in the immediate aftermath of the GFC, mining companies cut their workforce by 15 per cent. Very little mention was made of the fact that it was the government that acted decisively to underwrite confidence in the financial and banking sector and to bolster demand in construction and retail—the two highest sectors for employment.
There were also those in the mining industry who tried to blame the equity market jitters last May on the mining tax proposal and also claimed that a mining tax would hurt superannuation by harming resource stocks. Those claims were so ridiculous that David Buckingham, former head of the Minerals Council, was moved to describe the miners' resistance campaign as 'hysterical' and 'complete rot'.
Along with overstatements there was also fearmongering. We were told that fairer tax reform, just like the Clean Energy Future package, would jeopardise investment in Australian resources projects. The shadow Treasurer said that the requirement for hugely profitable mining companies to pay a fairer share of tax on profits above $50 million was 'almost guaranteed to kill the mining boom stone dead'. If the shadow Treasurer possesses a passing familiarity with the economic and investment data, he would know that resource sector investment, which was $35 billion dollars in 2009-10, grew to $47 billion dollars in the financial year just passed—after the announcement of the MRRT—and that it is projected to reach a staggering $82 billion this financial year.
In recommending that these bills be passed, the House of Representatives Standing Committee on Economics report on the Minerals Resource Rent Tax Bill found that mining companies generated profits of $92.8 billion to June and have plans on their books to invest $430 billion in the further expansion of their industry. The report noted that in the last decade mining profits have jumped 262 per cent. The Australian resources sector has a long record of outstanding, high-level competitive performance, but it is only one of many sectors of our economy and it should always be subject to the same kinds of consideration, scrutiny and regulation as are applied to every other sector.
Philip Daniel, deputy head of the International Monetary Fund's tax policy division has described the MRRT as a 'significantly worthwhile reform' that should be copied by other mineral-rich nations, while the OECD, in its 2010 Economic Survey of Australia, said:
The proposed minerals resource rent tax on coal and iron ore operations, along with the extension of the petroleum resource rent tax, are justified on both equity and efficiency grounds.
This reform is not just about ensuring a fair share for all Australians; it is also about improving the tax system across the board. It delivers a tax discount on bank interest, which is often the only investment income for many low-income earners and lower-middle-income earners. It delivers the administrative ease and value of an instant write-off up to $6,500 for small business and it underwrites the reduction in company tax to 29 per cent for all businesses from July 2013, with the tax break for small business to operate from next year.
Finally, and perhaps most significantly, it delivers a further instalment of Labor's great superannuation project. With the passage of the minerals resource rent tax, we will see a staged increase in compulsory employer superannuation contributions from nine to 12 per cent, which will boost the retirement savings of 8.5 million Australians with additional, expanded super concessions for 3.5 million lower-income earners and 275,000 people aged over 50. This will make a huge difference to the position of individual Australians in retirement and it will make an enormous difference to the economy in its aggregate effect. As John Brogden, the Chief Executive of the Financial Services Council and former Liberal leader in New South Wales, observed earlier this month, 12 per cent superannuation:
… sees more than half of the Australian population have an adequate retirement and that's the difference between heavily relying on the pension and having part pension or no pension.
This increase in superannuation, which is both prudent and necessary, will make a dramatically positive difference to the retirement income of working Australians, which includes more than 48,000 workers in my own electorate of Fremantle.
Perhaps the most overlooked aspect of the MRRT package is the more than $6 billion that will be invested in vital infrastructure around Australia through the Regional Infrastructure Fund. In Western Australia alone $480 million has already been earmarked for the Gateway WA project, which will see five vital upgrades to Perth's transport infrastructure and highway network.
I am sure it is a matter of serendipity that the parliamentary year should come to an end with these bills, which, along with the Clean Energy Future package, represent large-scale reforms that change Australia for the better and for the long term. They build upon a number of other national policy achievements in 2011 that all Australians now share, including paid parental leave, historic mental health jobs skills and training packages, and the greatest investment in public transport of any federal government. The minerals resource rent tax and the extension of the petroleum resources rent tax, in combination with a range of tax reforms, and crowned by this new and necessary instalment in Australia's great superannuation story, is a fitting note on which to end what has been a tough but substantial year of good government.