I spoke in parliament today about the government's Minerals Resource Rent Tax package.
Minerals Resource Rent Tax and Related Bills Including Superannuation Guarantee
21 November 2011
The legislation before the House today deals with the imposition of a profits-based tax on Australian minerals. In predicting the impact of this tax on the mining industry it is useful to look back into history, to the history of the Petroleum Resource Rent Tax. Back in 1987, the Hawke government proposed that the offshore oil and gas industry shift from a royalty regime to a profits-based regime. There was outrage from the industry. Industry members took out front page ads. They said a profits-based tax was anticapitalist. Predictably, those on the coalition benches supported them.
Over the last couple of decades, we have seen a boom in precisely that sector. As the economists told us, going back to the theory of Brown Taxes, a profits based tax was good for that sector. Under the old crude oil levy and royalties, the Bass Strait partners were going to shut several of their oil fields and not develop further gas fields. Under the PRRT, there is more than 20 years of oil production and 30 years of gas production remaining in Bass Strait. As the Minister for Trade, who was then an adviser to the Hawke government, has pointed out, history is now set to repeat. The coalition are railing predictably against the Minerals Resource Rent Tax.
There is another sense in which it is Groundhog Day for the coalition. The revenue from the Minerals Resource Rent Tax will go to fund an increase in superannuation. It was again a Labor government, back in 1992, who put in place the superannuation guarantee levy, guaranteeing nine per cent superannuation for all Australians, ensuring that Australians would be able to retire with dignity. What did those opposite say at the time? Well, the member for Mackellar said that there would be firings, that businesses would be regulated out of existence. But now of course we know that under compulsory superannuation Australians have more retirement savings that see them better able to face retirement.
But we on this side of the House believe that nine per cent is not enough. It is certainly not enough for new members elected in this place, who receive 15 per cent superannuation. We believe we need to increase the superannuation contribution to 12 per cent. Yet again—another Groundhog Day moment—those opposite are saying, 'No, you can't do it.' They are saying no to the profits-based tax and no to the increase in superannuation.
The Minerals Resource Rent Tax we are putting in place today is a more modest tax than the successful Petroleum Resource Rent Tax. While the PRRT has a 40 per cent rate, this one, when you take into account the automatic deduction, has a 22.5 per cent rate. It does not kick in until you make an annual profit of $50 million. So when people refer to ‘small miners’, it is worth bearing in mind that we are talking about people making some very large profits indeed.
In the House of Representatives Standing Committee on Economics inquiry into this package of bills, the representatives from the Council of Small Business Australia made it quite clear that $50 million in profit was well above what their members would expect to earn. It has been the product of a careful consultation process, including a Policy Transition Group—led by Don Argus and the Minister for Resources and Energy —and the Resource Tax Implementation Group.
It is important to recognise the context in which we are implementing this reform. Before the last mining boom, Australians got one dollar in every three dollars of mining profits, through royalties and resource charges. By the end of that boom, it was down to one dollar in seven. Profits were over $80 billion higher in 2008-09 than they had been in 1999-2000, yet the government only collected an additional $9 billion in revenue.
A profits-based tax is a fair tax. Because it is a rent tax, it ensures that the burden does not fall on workers or communities. It falls instead on the owners of the mining companies. The incidence of a minerals tax is different from the incidence of a company tax.
Many international policymakers understand this. In fact, it is not just those of us on the progressive side of politics who get it. I draw the House's attention to Sarah Palin's time as Governor of Alaska. During that period, Sarah Palin introduced a Petroleum Profits Tax. It is unusual that those on the opposite side of the House are further to the right of Sarah Palin. Sarah Palin wants a profits-based tax; those on the other side of the House want to stick with the old, outdated, unfair royalties regime.
The Minerals Council of Australia get this. In their November 2008 submission to the Henry tax review, they argued for a shift from a royalty-based system to a profits-based system. They did so because they knew that would be a more efficient way of taxing the minerals that are the birthright of all Australians. That has been widely recognised across the political spectrum up until this nay-saying Leader of the Opposition came in.
A profits-based tax is the right thing to do. It is an equitable tax, but it is also a more efficient tax. The revenue from this tax will go to fund important investments for all Australians. It will fund a company tax cut for all companies, down to 29 per cent; a new tax break for small businesses; investment into the regions, through the Regional Infrastructure Fund and the Regional Development Australia Fund.
It will simplify the personal tax system with a standard deduction of $500, increasing to $1,000 from 2013. It will support a boost to superannuation for 8.4 million Australians. It will support expanded superannuation concessions for 3½ million low-income earners. So all of this revenue is going to put in place the building blocks for Australia's future prosperity, but we know that being 'Mr No', the Leader of the Opposition will set in place repealing it. He has already said to the Australian people he will repeal the carbon price. He said he will repeal the Minerals Resource Rent Tax. He said he will stop the NBN and he said he is going to stop these because it is absolutely critical to stop them.
It is difficult to see how some of these reforms can be undone, but what is curious over recent weeks is there is one reform that the Leader of the Opposition will not repeal, and that reform is the increase in the superannuation co-contribution from nine to 12 per cent. It is a particularly surprising reform to be saying that you are not going to repeal, given that the rate is increasing gradually from now until 2020. But the Leader of the Opposition has said, 'I'll vote against it in this place but, if I'm elected in 2013, I'll support all of the incremental increases up to 2020.'
It is good that the Leader of the Opposition has come to his senses on at least one Labor policy reform. But the problem for him is that he now has to pay for that reform. We know the opposition have some serious financial problems. They went to the last election $11 billion short in their costings—they are now $70 billion short in their costings. That means when Australians are looking at what the Leader of the Opposition has on the table, they should be aware that there is $70 billion worth of slash and burn still sitting secret. They should be aware that there is $70 billion worth of additional savings the coalition has to find. That is on top of the 12,000 public sector jobs which are going to be slashed out of towns like Canberra, Darwin and Townsville.
If the Leader of the Opposition is going to repeal any law, the one that he really needs to repeal is the law of mathematics—the law that says that he has to make his books balance, the law that says that if he is going to support a spending measure, he needs a tax measure to back that up. But of course he is unwilling to do that. The only bit of this package that he says he will support if elected is the spending measure, the superannuation side of it; not the taxing measure, the Minerals Resource Rent Tax. We know why the opposition are in such a deep hole. They are no to reform, no to economists. If they do not like what economists have to say, they go out and attack them. But they are yes to special interests. There is no special interest that fails to get a hearing from the opposition. If you are willing to make a case for cutting a hole out of a piece of legislation, the opposition would be happy to bring your case to the parliament. Theirs is a policy of ‘no special interest left behind’.
We see the opposition coming into this place and making the sovereign risk argument. I am reminded of the old rule in high school debating, which is that when you have got two teams, the first team to mention the Nazis automatically loses. There are some arguments in high school debating that, when they come out of your mouth, we know you have run out of any sensible argument to make. That is true of the sovereign risk argument as well. Those opposite cannot work out a good reason for opposing a profits-based tax. They know the PRRT model has worked well. They know there is no rational reason for opposing this tax, so they reach deep down and pull out the sovereign risk argument. They say that doom and disaster will rain down upon Australia if we are to tax mining on a profits basis rather than a royalty basis.
You can tell the lie from that simply by looking at minerals investment in Australia. It has never been higher. Investment in this sector is at record highs but, for those opposite, no scare campaign should be left unturned. They are willing to run any scare campaign no matter how unbelievable.
Those opposite are the Colonel de Groot of Australian politics: they are willing to slash, wreck and break. They are willing to come in here and do anything they can in order to break down good constructive reform. We saw this last week during the visit of the President of the United States. There was brief moment where the Leader of the Opposition had a chance to look prime ministerial, but he was not able to take it. He was not able to step out of his day-to-day attack, attack, attack mode and just for a moment focus on what is in the interests of Australia.
The Leader of the Opposition is always more interested in tearing down the Labor Party than he is in building up Australia. His political interests are what get him out of bed each morning. There used to be a proud tradition in the Liberal and National Parties of Australia of noblesse oblige but today the coalition are all noblesse and no oblige. They are willing to back away from reforms that will help low-income earners in Australia; reforms that will help small businesses in Australia; and reforms that will put fair taxation in place for the minerals that are the birthright of all Australians. That revenue will ensure that older Australians can retire in dignity, that they can retire with 12 per cent superannuation which will ensure that they are able to do the things they have wanted to spend their lives doing. They will be able to enjoy taking that grey nomad trip around Australia. They will be able to enjoy appropriate living standards.
We are going to be funding this out of an extremely efficient tax—a tax which, contrary to what some came before our House Economics Committee and argued, will be paid overwhelmingly by large miners. That is what Treasury said to us. That is what the Minerals Council of Australia said to us. Those opposite are willing to believe the claims of Fortescue, a company that has never paid a cent of company tax, has changed its position on the Minerals Resource Rent Tax and been willing to run arguments in its self-interest rather than in the national interest.
Those opposite should be very careful of this sort of special interest pleading. They should be aware that Australians have a long memory, that Australians are watching to see which political parties make decisions based on the long-term interest of Australians and which political parties focus on the right thing to do—that is, moving to a profits based mining tax, boosting the retirement incomes of Australians and cutting the company tax rate. I commend this package of bills to the House.
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