Nick Xenophon (SA, Independent) Share this | Hansard source

I agree with Senator Lines that a government putting up a measure and then trying to throw in a few other things as part of it is a sneaky way of legislating. I do not think that is fair. There are some measures here that are unrelated to the mining tax but relate to superannuation benefits and the like that I think ought to be resisted for that reason alone. The debate on the Minerals Resource Rent Tax Repeal and Other Measures Bill is a good opportunity to review the sorry story of how a central plank of the former government's policy agenda in all likelihood is weaving its way onto the scrap heap of Australia's tax reform history and also to look more broadly at issues of tax reform and the challenges we as a nation will face in the years to come.

In 2008 the then Labor government commissioned the respected then Secretary of the Treasury Ken Henry to review Australia's tax system. About two years later, Mr Henry—who was then and is now a widely respected expert on tax and other economic matters—delivered his report, which was optimistically entitled, Australia's future tax system review. The Henry tax review made 138 recommendations. Among them was a resources rent tax, which Mr Henry said, would:

… ensure that the Australian community receives an appropriate return on its non-renewable resources.

Mr Henry said the existing taxes and royalties were unresponsive to the steep rises in profitability in the resources sector. A rent tax would replace existing charges on mining projects and better track the so-called superprofits said to be earned by some miners.

But, instead of engaging constructively with the recommendations raised by the Henry review, the then Labor government cherry picked what it thought were the so-called 'easy sells' politically. Then Treasurer Wayne Swan and then Prime Minister Kevin Rudd picked up the resources super profits tax and ran with it. But, as they soon discovered, it was not an easy sell—far from it. While the government saw the superprofits tax as a popular move for a sector which was making billions of dollars in profits each year, many believed the concept of rent taxes to be outdated and discredited.

The resources sector mounted a spirited, high-profile and very expensive campaign against the superprofits tax. While then Prime Minister Kevin Rudd tried to hang tough, the attempt to introduce the original version of this tax foundered. Labor changed leaders and the new Prime Minister, Julia Gillard, sought to fix the political problems with the resources sector caused by the tax by sitting down with three massive mining companies—Xstrata, BHP Billiton and Rio Tinto—to hammer out an agreement. I agree with some who have observed that this was akin to taking advice on competition policy in the supermarket sector just from Woolworth and Coles and leaving out IGA and the independents.

The result was the minerals resource rent tax. It was not so much a dog's breakfast but a bit of a dog's smorgasbord. The tax has not worked as intended. Concerns were raised about the movement of global capital away from Australia's mining sector. I know a lot of water has gone under the bridge since we debated this two years ago, including a fall in many commodity prices, such as iron ore. But the MRRT did and does add to the perception, at least, that Australia is a high-cost country for resources companies.

After reluctantly supporting the MRRT two years ago, I reluctantly support its repeal today. The MRRT was poorly designed and poorly implemented as a tax. There was not adequate transparency in the design of the MRRT. Its underlying revenue assumptions seem to be known only by the three big miners and the government. History has shown that, had there been some transparency over these negotiations, the MRRT may have been saved from itself; but it was not to be.

A tax which was predicted to raise $22.5 billion in its first four years only raised $126 million in its first six months. The tax was far from the massive economic impost on the resources sector that the coalition had then loudly claimed it was. Instead of a supertanker full of cash, we got a rubber dinghy with some loose change that was taking on water from the moment it was launched. Ken Henry's broad-based superprofits tax would have applied to 2,500 mining and petroleum companies. The MRRT applies to a limited number of iron ore and coal companies. Perhaps in the future a properly designed resources tax may be passed.

A January 2014 poll conducted by UMR Research found that the majority of Australians still think that multinational mining companies do not pay enough tax. Only one in 25 Australians think the minerals sector pays enough tax. That is according to the poll, which interviewed 1,000 people online. The ALP says that it is committed to the principle of a resources rent tax and opposes this repeal bill. I understand and respect that. But clearly the current leadership has backed away somewhat from associating with the original legislation imposing the tax, which had its genesis some three prime ministers ago.

Campaigning in Western Australia recently for the upcoming Senate by-election, the Leader of the Opposition, Bill Shorten, called for 'a dialogue' with the mining sector ahead of formulating the ALP's policy for the next federal election. I think that is pretty wise, I think there needs to be that dialogue and I think that is the way forward. That seemed to be a strong hint that the ALP is not so much committed to this tax as looking at an alternative way of genuinely dealing with superprofits.

This tax was always a concern to the mining sector. Small and emerging miners remain concerned that they have been disadvantaged by the tax in that the mining sector could no longer claim competitive neutrality, given that projects that were approved post the tax have been much less competitive for those small and medium miners. Surely clever thinking can be brought to bear on how best to support small and emerging miners using either the existing revenue of the MRRT or other funds.

Built infrastructure in the form of ports, sealed roads and electricity transmission lines must be high on the priority list, as has been made clear by the Chamber of Mines and Energy in my home state of South Australia. But further, connecting outback towns in South Australia—such as Coober Pedy and Oodnadatta—to the electricity grid is a long-overdue measure that would further support the new mining ventures that are emerging in the far north of South Australia. That these towns remain reliant on high-cost diesel generators and must pay much higher prices for electricity is a sad but little-known fact. There is a real potential of geothermal energy being a real source of competitive and reliable energy in the far north of South Australia.

When we were debating the MRRT, I said many times that we had to be very careful not to kill the goose that lays the golden egg. However, in the two years since the flawed MRRT was passed, commodity prices have taken the shine off that so-called gold. The mining boom is over, we are told. This surely adds weight to the concerns raised by the mining sector about this tax, especially for small and emerging miners. They are the miners we should be encouraging to grow. They are the miners that really are the future of this industry. We should not just be looking at the big three. Many small and emerging miners are active in my home state. At a time when BHP Billiton has placed Olympic Dam and its multi-billion dollar investment in job creation on the backburner, South Australia's small and emerging miners are crucial to the future of the sector.

In 2011, there were eight new mineral exploration licence applications; in 2012, there were 14; in 2013, there were 84; and so far this year there have been 23, according to figures compiled by the state government. Clearly, the future of my state's mineral sector is at an important stage and should not be put at risk. I will also be strongly supporting the amendments of Senator Madigan to retain the introduction of the superannuation guarantee charge's increase to 12 per cent from July 2019 and the low-income superannuation contribution of a maximum of $500 for people earning less than $37,000. These were sensible amendments. They were initiatives of the former government that were very worthy amendments in increasing the pool of superannuation contributions by employers. They were gradual and sensible. For low-income earners we need to provide whatever incentives we can to ensure they boost their superannuation. I do not like the fact that those amendments were rolled up in this bill. Senator Lines made reference to other amendments as well.

I also said at the time the MRRT was passed that a debate on Australia establishing a sovereign wealth fund was necessary. Today it is long overdue. The Member for Wentworth, Malcolm Turnbull, acknowledged in a speech in 2011 that:

Many countries, particularly those dependent upon single finite resource commodities, already have such funds—globally they are estimated to hold up to $4 trillion in assets.

The global nest egg of commodity based sovereign wealth has grown since I quoted Mr Turnbull some two years ago. Unfortunately, so has Australia's opportunity cost in not establishing one. More broadly, the failure of the MRRT is emblematic of the lost opportunity of tax reform, and I am not singling out the former government on this. That would be unfair.

As Ken Henry commented last week on ABC TV's 7.30 program, there is an 'emerging crisis' in tax policy in Australia that has made it impossible for the federal government to fund new social policies with the current tax base. Mr Henry said the budgets of the states and the federal government were probably not sustainable. I also note that the current Treasury secretary, Martin Parkinson, is reported just a few days ago as calling for 'a reality check' in an article in TheAustralian on 21 March. He warned there was a widening gap between what the community expects governments to deliver and what can sustainably be provided. As the outgoing Treasury secretary, Mr Parkinson needs to be congratulated for those remarks.

States have relied on highly volatile sources of taxation and a dwindling GST take. In a sense, that is reflected in the comments of both Ken Henry and Martin Parkinson. Federal taxes, as a percentage of national income—of GDP—have fallen three per cent since 2001. That is something that Mr Henry said recently on the 7.30 program. Mr Henry, as the Prime Minister has helpfully pointed out, is now a private citizen; as such, he went on to make a veiled criticism of politicians and the media. He said the public had not been properly informed of the challenges in tax policy or the repercussions of not addressing them. Ken Henry had the intellect and the stature to come up with 138 recommendations across nine broad themes. Instead of taking 138 steps to tax reform, the then government took a couple of steps forward and then lost its balance. Yet the review that bears his name sits largely untouched, as much by this government as the previous government. I will support this bill because of the inherent flaws in the design and execution of the tax, but the challenge for this and future governments is to heed the recent warnings of Ken Henry and Martin Parkinson.