Alex Gallacher (SA, Australian Labor Party) Share this | Hansard source

I rise to make a contribution in this debate opposing the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013. One of the beautiful things about this Senate is the depth of research that is available to the most casual of observers or people with the slightest interest in these sorts of debates. My research indicates that a resource rent tax is quite different from a royalty. Basically, royalty is a tax on production; a resource rent tax is a contribution made after the appropriate investment is recovered for exploration and investing back into business, and it is on super profits.

The first rent tax I came across was the PRRT. Some contributions in Hansard on 23 March 1987 are:

This legislation is yet another example of this Government introducing new taxes on the few productive industries we have left in Australia, thereby inhibiting their development

We have a further contribution:

The Government should try to remember , in the whole debate about oil exploration—it seems entirely blind to this—that we have to compete with other countries …

It says:

Again, a multinational company looking to expend dollars on oil exploration is going to do so in a country with a better cost structure and therefore the potential for a better rate of return than Australia has.

It says:

I think it is an ideological proposal which is going to do very real damage to oil exploration in Australia. It is going to affect our balance of payments situation and it is going to affect the overall state of our economy. If this is to be one of the pieces of legislation which will form the general epitaph of the Government, I think it is highly appropriate. It is an anti-production, anti-development, anti-profit and anti-export tax …

That was a contribution in 1987, essentially about a rent tax. Here we are, in 2014, talking about another rent tax. What has happened over those intervening years, some 26 years, is that the Petroleum Resource Rent Tax Assessment Act 1987, effective 15 January 1988, has existed and has contributed to the Australian economy. Despite its birth in a wave of Liberal coalition castigation—that was the then member for Mayo, Alexander Downer, taking it to pieces in his original speech—it has continued to contribute to the Australian economy and to the Australian tax base. It contributed $42 million in 1989-90 and that rose to $293 million in 1990-91.

Finally, 79 companies in Australia paid the PRRT $1,584 million in 2011-12—up from $1,047 million paid by 71 companies in the previous year. This data is available from the ATO. So, in the debate in 1987, all of the things it is being alleged today are going to come to pass were alleged about the PRRT. We had a long period where the Howard government could have repealed the PRRT. They could have changed the PRRT or got rid of it if it was such a horrendous piece of legislation and if it was driving people offshore and discouraging investment.

After a quick glance around Australia you would see that there has been substantial investment despite all of the ills that were going to befall the economy and the country at the introduction of the PRRT. Those who scream the loudest on the other side are going to be on the wrong side of history in this argument. The example of the PRRT means that there is a future for the MRRT. It can work in a way that will not discourage exploration and investment—in fact, that probably is the case.

As I speak, around 105 large miners, 35 small and medium miners and five micro miners have submitted their MRRT instalment notices, whilst making no net payments. So they are in the picture. The difference between the number of companies registered for the MRRT and those lodging instalment notices is due to the Taxation Office providing an exemption for certain categories of mining—those holding only mining exploration licences. They are exempt from lodging instalment returns for the 2012-13 MRRT year. However, they still need to lodge the paperwork.

We hear the other side howling about the administrative costs and all the rest of it. By necessity, these things need to be carefully worked through. The appeal to the Australian community of a rent tax on a mineral resource which is finite is because it is sensible—rather than a tax on production, which is a royalty. I think a royalty would be more of a disincentive to getting projects off the ground, because it has no regard for profitability.

So we have a situation where those on the other side have claimed this incredible mandate to repeal, repeal, repeal. They have gone, they say, to the electorate. But there was no real debate about whether there should be a rent tax versus a royalty tax or whether the finite resources of Australian are Australian and should bring some benefit to the wider economy. It was simply the 'no-alition' saying: 'They're a bad government; we don't like them. They told a lie. We want to get out of it. We'll get rid of it.' The fact is that the Roy Hill project has come to fruition in the last few days, despite the existence of the minerals resource rent tax. That means the financiers and the miners can make very detailed decisions about tremendous investments in Australia. It does not seem to bear weight that the MRRT is pushing people away to other parts of the world.

We know there is competition in the resources industries, but in Australia we have a very efficient mining sector—which has costs of production, but there have been extremely good prices. We also know that, should those prices fall, there is still profitability in the mining sector. We know that it is estimated that 83 per cent of the shareholders in Rio Tinto are overseas and around 60-plus per cent of BHP Billiton investors are overseas. We know that foreign shareholders take about $50 billion out of the country by way of dividends. But we also know that those companies bring about $205 billion back into the country to be invested.

The government is saying that if this repeal does not happen the whole world is going to slow down and close. That does not stand up to any real, prudent scrutiny. The reality is that the minerals resource rent tax has not been a catalyst for people to stop investing in Australia. It has not been a catalyst for projects not getting off the ground. It has been an emotive, political arguing point which the government in opposition used to tremendous effect, particularly in Western Australia.

I am unashamedly pro-mining. The more mining we can get in a sensible, environmentally sustainable way in Australia the better off this country will be. I am pro-foreign investment. I am also for things like sharing the wealth of our nation around. You do not have to spend too much time in Perth to realise that there are two economies in Perth. There is one absolutely booming economy. You evidence that if you happen to lob there when there is a gas industry conference and you cannot get a motel within 20 kilometres of the city under $500 a night. Recently I had the opportunity to spend a couple of days in the city. I was astounded at the lack of advantage, where people were begging in the streets. You could not walk up and down Barrett Street without being asked for a smoke or a dollar, and there were a great number of people who to me looked to be in a very ordinary state. I accept that, like my own city, if you live in a city you very rarely spend all that much time in the centre of your city, other than going in and out during the course of your business, but, when you actually see some of the sectors that are disadvantaged in Western Australia, there is a very good case for spreading some of the wealth of the nation around.

The purpose of this bill is to basically repeal the MRRT and give effect to schedule 1. Also, we have schedule 2. There are eight other measures that this bill addresses. Some of those really go to the heart of the matter that I have raised. There are plenty of people in Western Australia, as there are throughout Australia, who are not sharing in this extraordinary wealth creation from the mining boom. You do not have to be Einstein to realise that there are lots of people in all parts of Australia who share in it by flying in and flying out.

Schedule 9 proposes to abolish the Schoolkids Bonus—a lump sum payment made twice a year to those on family assistance and other payment recipients with school aged children. That is the consequence of getting rid of the MRRT: we are going to take the Schoolkids Bonus away from families who may not be doing as well as those who are enjoying the benefits of the mining boom. There is a proposal to abolish the Income Support Bonus—a lump sum supplementary payment made twice a year to people on certain income support payments. You would not be very aware if you had not heard Senator Siewert make enormous contributions on people in the homeless sector and people on Newstart and the like who do not share in all of these economic opportunities.

Then we go to the Superannuation (Government Co-contribution for Low Income Earners) Act 2003. Low-income superannuation contributions will not be payable in relation to eligible contributions made after 1 July 2013. This is basically, you would imagine, the Hon. Tony Abbott's heartland. This is basically women who work, part-time casuals, who can get their hands on an additional sum of money through scrimping and saving, put it into their superannuation and have it met with an equal or the larger contribution. They are low-paid workers trying to make their way in the world and provide for their retirement. That will also go.

They say the MRRT is cruelling the mining sector. There is no evidence of that. Roy Hill was evidence that the exact reverse is true. We do not have any projects which have fallen over because of the MRRT. The government argues that it does not collect enough money anyway, so which way do they want to have the argument? Is it a tax that is not collecting enough money or is it an awful tax that is stopping people from investing in our country? I do not think that case is well made. Schedule 5 amends the ITAA 1997 to repeal the immediate deductibility of geothermal exploration or prospecting expenditure. If we are going to meet our targets with respect to carbon emissions, geothermal could be one of the solutions, and we are taking away the immediate tax deductibility of that.

So we have hit the schoolkids, we have looked at people on low wages trying to superannuate themselves, we have looked at people trying to find solutions for our energy sector, and then we go a bit further: we have a whack at small business. A small business entity can at present deduct the first $5,000 of the cost of a motor vehicle in the income year that it is first used or installed ready for use. This concession treatment will be withdrawn. Where are we going in this debate? They say the MRRT has stopped mining and it has cruelled the opening of new mines, when the evidence appears to be on the contrary. They say it is such a horrific thing. But the impact of all of these changes, with the schedules underneath, just go to the heart of people who do not enjoy the mineral boom.

It is true that there are two economies in Perth: those with and those without. I saw ample evidence on a weekend in Perth recently that a number of people are missing out. Their look at the world is vastly different to the one that we have had here from the government side. You would not need to be Einstein to work out that there are other people in regional Australia. There is the Regional Infrastructure Fund and the Regional Development Australia Fund. I had the opportunity of visiting a number of places in the electorate of Grey and spoke to many grateful recipients of those funds. There is the Port Lincoln Airport upgrade and any number of projects. At a recent luncheon for the regional mayors of South Australia they asked, 'Alex, what's going to happen with those projects?' I said, 'Well, you'd better speak to Dr Southcott,' who promptly said, 'You'd better speak to Minister Briggs'—pass the parcel—but there will be no money for those things. Those things will be unfunded. The things they have on the drawing board will have no stream of funds to go to. If the government eventually is successful at getting rid of the MRRT, I would like to know what they are going to put in its place, particularly for regional Australia and for those Australians who are not doing as well as they could be.

Sitting suspended from 18:30 to 19:30