4 June 2014
Labor believes strongly that the mining industry has an important part to play in Australia's economic prosperity. The shadow Treasurer was indeed just commenting to me during the division about his recent visit to the Santos control centre in Brisbane, and I have enjoyed many productive conversations with Australia's miners. Mining constituted 80 per cent of the growth in the last quarter, giving a lie to those who have run a scare campaign suggesting that a profits based mining tax would debilitate the mining industry.
In a recent speech the shadow minister for resources, the member for Brand, gave to the Australian Resource People Summit in Perth, he noted several important facts about the future of the LNG industry:
In the none-too-distant future revenue to the Commonwealth and to the States of Australia from LNG production will be greater than the revenue from iron ore.
Already LNG has surpassed coal.
"Think of LNG prices as one blade of a set of shears and productivity as the second blade of the shear".
The member for Brand also talked about the importance of floating LNG and the innovation that comes from maritime engineering excellence, referring to the embrace of floating oil production in the Timor Sea in the 1980s and discussing the transformation that is taking place worldwide with the United States on the verge of becoming a net energy exporter for the first time since World War II. In South America, the newly widened Panama Canal opens next year, which will provide passage for an estimated 12 million tonnes of LNG a year, a thought no-one had in the planning six years ago when the work to widen the canal began. There are 16 floating LNG projects now—in Israel, Indonesia, Brazil, Canada, Mozambique and the United States.
The mining industry has a strong future and we on this side of the House welcome that. We do, however, recognise that it is important that there a fair tax regime in place. On this side of the House, we have made that case from an equity perspective. Those on the Labor side of the House tend to be more concerned about inequality than those on the coalition benches. But there is also a conservative argument for it, a Burkean argument for it. As Edmund Burke said, we are here not just for the current generation; we are informed by the generations that have gone before us and we need to make decisions for the generations to come. A fair resource tax system for minerals in the ground is absolutely fundamental to that. As Ross Garnaut noted in his excellent new book Dog days: Australia after the boom:
"More and more of the load is carried by income taxpayers with limited opportunities for avoiding taxation, and is economically distorting, unfair and probably politically unsustainable".
He pointed out that one of the benefits of carbon pricing was that it lowered the taxes on work while increasing the burden on pollution.
The measure in the Tax and Superannuation Laws Amendment (2014 Measures No. 3) Bill 2014 is a sensible measure to prevent base erosion within the mining industry. It was first announced by then Assistant Treasurer David Bradbury in the 2013-14 budget. There was an Assistant Treasurer who was serious about tax reform, a man who has now taken up a senior position, not a political appointment but one won in his own right, focusing on taxation in the OECD. Yet, now, this government not only lacks an Assistant Treasurer of that calibre, it indeed has no Assistant Treasurer at all. While Arthur Sinodinos has stepped aside, the government is left with the finance minister sharing the burden of Assistant Treasurer. That cannot be the entire explanation for the government's bumbling and its hapless performance in selling this budget, but the lack of Arthur Sinodinos's voice into the budget preparation is surely part of that. On this side of the House, we support sensible measures to prevent base erosion within the mining industry. We recognise that it is important to protect the concession that allows companies to immediately deduct costs incurred in genuine exploration activity, but that in recent years it has been apparent that companies were using this deduction to claim expenses not associated with genuine exploration activities.
The measures in this bill amount to more than a billion dollars of government revenue over the forward estimates. That is a good thing and is welcomed by this side of the House. What is less welcome is that while the government is closing this particular loophole, it is leaving many other loopholes open. More than a billion dollars has now been forgone in measures that were to tackle base erosion and profit-shifting. More than a billion dollars is around the price of a new hospital; a new hospital that could have been built if this government had been serious about tackling multinational profit-shifting. It is a government that is happy to talk the big talk in the G20. In Davos, the Prime Minister said: 'The G20 will continue to tackle business artificially generating profits to chase tax opportunities.' Fine words, but how have they been backed up in action?
Unfortunately, the only action this government have taken on multinational tax integrity is to dump Labor's thin capitalisation reforms and to show strong signs that they are going to backtrack on the transparency measures, measures that would see the largest 200 companies in Australia publish their tax paid. It is a reasonable measure that has been certainly supported by all of the constituents whom I have spoken to about it, and reflects the fundamental notion in integrity that sunlight is the best disinfectant.
The government wants to bring this secrecy back when it comes to reporting tax paid. It wants to dump measures on multinational profit-shifting. To be specific, Deputy Speaker Broadbent, because I know you like the specifics on these things, the government has dumped a measure for reform in the offshore banking unit regime, costing the forward estimates $180 million. It is not going to proceed with legislative elements of the measure to improve tax compliance through third-party reporting and data-matching, costing the budget $113.1 million. It will not proceed with changes that would have applied to multiple-entry consolidated groups, costing the budget $140 million. It will not proceed with the abolition of section 25-90, costing the budget $600 million. It will not proceed with changes to offshore banking units, costing the budget $100 million. The total of all that is $1,133.1 million. Over a billion dollars in measures that protect tax integrity have gone by the wayside from a government who say everyone has to bear the burden.
Everyone is not bearing the burden and Australians will be rightfully outraged when they see that this is a government that is going soft on multinational profit-shifting, so it can go hard on single mums, the unemployed and pensioners. That is not sharing the burden; that is transferring resources from the most vulnerable to the most affluent in the community. It is a government that thinks it is okay to spend $40 million raising the non-concessional superannuation cap on people who put more than $150,000 a year into super. Putting it at 15 per cent a year, we are talking about people with million-dollar incomes. So the government sees fit to put aside $40 million to assist people with incomes of $1 million a year or more, while at the same time saying to unemployed Tasmanians in the north-west of Tasmania, where I visited recently with Senator Anne Urquhart, that they have to wait six months in order to get unemployment benefits—that they are to be punished, effectively, because the unemployment rate on the north-west of Tasmania is higher than the national average. It is a dreadful measure, and one which could have been averted if this government were serious about cracking down on multinational profit shifting.
These sorts of measures are deeply concerning to the Labor members on this side of the House. The measure that we are debating today is a Labor measure, brought forward by the great tax reformer David Bradbury. And we are pleased to see it implemented—make no mistake. But we want to see the government have as much enthusiasm about closing the other tax loopholes which are currently causing the burden to fall on the most vulnerable Australians.
Compared to the honest benchmark—as the member for Cook noted yesterday, the only honest benchmark—the Pre-Election Economic and Fiscal Outlook, the budget deficit is increased this year, next year and over the forward estimates. This is a budget that breaks promises. Worst of all, it is a budget that is deeply, deeply unfair. We need a government that is serious about cracking down on multinational profit shifting, and we do not have that government today.