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Minerals Resource Rent Tax Amendment (Protecting Revenue) Bill 2013

Speeches in Parliament
Scott Ludlam 28 Feb 2013

Senator LUDLAM (Western Australia) (17:12): It was worth sitting through that speech just to get to that last bit, Senator Fifield-because that really exposed you. You started with confusion, which I will try and assist you with-through you, Madam Acting Deputy President-and you concluded with ignorance, which I am afraid I cannot help you with much at all.

We will start with the confusion, however, because it is a fair question: since Labor senators have looked to us, as Senator Bishop did, and coalition senators did as well, and you passed this tax-so then, in indication to the crossbenchers, how can you now come back and want to review it? I will help with that confusion. Our options in this place, as the crossbenchers, when a bill is brought forward by either of the major parties, are twofold-and we need to choose. This place does not always tolerate ambiguity: when it comes to a vote you need to pick one side of the chamber or the other to sit on. And our options in the instance of the MRRT were twofold: the ALP, the government, on the one hand-a major party that for a brief period of time chose an evidence based approach-set a task before the Treasury secretary and then adopted it, more or less as proposed, after a long process of review and design, such that the extraordinary profits being raked off by the resources sector could be, without any kind of structural damage either to the economy at large or to those individual companies, once the profits got to a certain level, redirected and redeployed through a super-profits tax. And this would not be the first jurisdiction in the world, you would be aware, where this has been tried.

Following that initiative by former Prime Minister Kevin Rudd, there was a $22 million public relations onslaught, which I think unbalanced the government and caught them somewhat by surprise. Because of some of the rhetoric we heard a moment ago from Senator Fifield, you would be aware that the Greens are used to the kind of invective being directed at us by people like Senator Fifield, who effectively just read in a bunch of press statements from the Minerals Council of Australia, and not particularly original work. You do appear to have stolen Mitch Hooke's homework there, Senator Fifield, because there was not an original word spoken.

Senator Fifield: I thought I was quite gentle about you.

Senator Mason: More gentle than I would have been, Senator Ludlam.

Senator LUDLAM: You will get your chance, Senator Mason. You will get your opportunity. In all honesty I do not think the government was actually prepared for the brutal and dishonest campaign by the mining industry. They passed the hat around and collected $22 million and did you over, and it was an ugly thing to watch. I can recall the television ads that ran. It evidently destabilised the ALP to the degree that it cost Kevin Rudd the prime ministership of the country. We have not seen that kind of thing in modern political history before.

Senator Williams: He had lost his way

Senator LUDLAM: A good government that had lost its way, to paraphrase you there, Senator Williams.

Senator Williams: The Prime Minister-

Senator LUDLAM: That is correct. It was in the aftermath of a really vicious and personal advertising campaign that effectively repeated most of the themes we just heard from Senator Fifield, from whom he pinches his homework. That is what we faced on one side. That was part of our choices. That internal destabilisation then cost a Prime Minister his job. What happened then is that it appears the Prime Minister and the Treasurer, delegating to Resources and Energy Minister Martin Ferguson-the inside man-handed a pen to the mining sector with which to write their own tax law. And what do you know? What came out of that process was something that was highly permissive and effectively geared towards a form of legalised-

Senator Fifield interjecting-

Senator LUDLAM: I promise I will get to that Senator Fifield. I promise I will allay your confusion. I can see you struggling with it. I will get there. Here is where I can help to resolve Senator Fifield's confusion. Our other choice is to sit on the other side of the chamber when a bill such as that is put to the vote-notwithstanding the amendments we did move, which I will get to in a moment-where there is the Abbott opposition, a political party that does not have the courage to take on the mining industry at all.

Senator Fifield: So it is our fault.

Senator LUDLAM: We have a choice between a flawed tax, which we can try to amend through the process available to us, or no tax at all. Senator Fifield, I must have allayed your confusion, because you are on your way.

Senator Fifield: It is all so clear.

Senator LUDLAM: It is all so clear now. Total capitulation. A policy that has rolled over on its back and is waving its legs in the air that somehow, Mr Tony Abbott, the Leader of the Opposition, has the political gift to turn into a show of strength. Complete and utter capitulation to the mining industry has somehow been able to be portrayed as tough and fearless leadership and as sticking up for ordinary people. There is real political genius at work there. It is fundamentally dishonest and nasty, but it is very clever.

So these are the choices we face on the crossbenches: a flawed tax or none at all. I can remember this very well because I participated in the debate. The amendments that the Greens moved both at the second reading and at the committee stage were shot down-what do you know?-by the combined numbers of the government and the opposition. That then leaves us with a stark choice at the end of the debate: vote for a tax we know is flawed or vote for no tax at all. So when Senator Fifield reminds us that the tax picked up no more than $126 million in gross revenue in the first two quarters of its operation, that is $126 million better than nothing, because that is the opposition's counterproposal.

The amendments we put at the time were voted down by the major parties on the basis that the Labor Party figured that was the best they were going to get, and the opposition will vote against anything that appears to try to redeploy some of these extraordinary profits back into the public good. We can try again, for example, with the bill we have brought to the chamber tonight, or we can try again through future inquiries, such as the one that Senator Milne, with the concurrence of Senator Cormann, has just initiated. Senator Cormann's motives are very clear. He has not tried to hide them. He wants to destroy the tax. He wants to pull it completely to pieces. At least that is transparent. Our motives are that we will use the mechanisms available to us in this chamber, as is one of our primary roles, to improve the legislation and to bring amendments forward to fix it. That is the purpose of this inquiry and I am very glad it is occurring.

So there are opportunities to fix the mistakes that are made. I will remind senators that the mistakes have been out in the open for all to see. It was a pretty blunt instrument that Minister Ferguson enabled for the mining industry and effectively handed to the big three. We had people with very detailed inside knowledge of the mining industry, people like AMEC, who represent the juniors and the mid-tiers in Western Australia, telling us, 'We are going to get done over in this process. You have given this to the big three to handle in their own interests, and here is what is going to happen.' They spelt it out in detail that even Treasury officials were unable to validate. They said, 'We are going to need to wait to see the figures, for example, on the way that the depreciation provisions are written into the bill.' Treasury would not touch it at the time. they said, 'We are going to need to see industry's numbers.' On the afternoon of the inquiry that Senator Bob Brown and I attended, AMEC spelt out for us exactly what was going to happen.

Professor Henry Ergas is not somebody I tend to quote at great length in this chamber. But he does appear from time to time and offers the benefit of his views on these sorts of matters. He is opposed to the super-profits tax and opposed to the MRRT. Nonetheless he is well aware how these things would be gained. He spelt it out for the committee and it was quite an enlightening session. He has quite detailed knowledge of the way our tax law works and the way that the targets of taxation can try to wriggle around and sleaze their way out of paying the tax. At the session-it must have been the Senate Economics Legislation Committee, on 21 February 2012-he said:
When you impose a significant tax you are always going to provide incentive for people to minimise the tax that they pay.

It is not necessarily illegal; it is just what happens.

One of the ways in which they are going to do that is to try to shift income out of the taxed pool into the untaxed pool. To that extent, yes, this tax does invite that.

I put to him a question about whether the complexity of the tax and the fact that the miners got to write it open it up to being abused. He essentially agreed in principle. I asked him then, 'What are the vulnerabilities?' As a professor of economics, he was reasonably well placed to answer the question. If he was going to game it and try to write his way out of having to pay any tax under this thing-if he was working for the companies who got to draft the bill-how would he do that? How would he shift income, as he put it, out of the tax pool and into the untaxed pool? Here is what he told us:

In all fairness I have not devoted all that much time to that. But I think the issues that will arise, even under the tax as it is currently proposed, will include timing issues, revenue recognition issues and particularly cost allocation issues; what the allowed rate of return on the downstream assets should be; how that allowed rate of return should be allocated; what the relevant asset base downstream is; and at what pace those downstream assets should be depreciated. All of those issues will doubtless arise in respect of this tax.

There you go, colleagues. I am very happy to agree on this occasion with Professor Henry Ergas, who forecast exactly what it was that the miners were going to do with the tax law that they were allowed to draft by resources and energy minister Martin Ferguson, on behalf of an Australian government, desperate and bruised as it was at that time by the assault of the mining industry on television and in the newspapers through both paid and unpaid coverage of their advocacy. It looked as though new Prime Minister Gillard just wanted the pain threshold turned down-just wanted the temperature turned down-and the assault to stop. And they gave the mining companies the pen.

It is not our role to be apologists for those who did the deal or for those on the other side of the chamber who oppose any deal being done at all. It is our job to recognise the mistakes that have been made and to correct them in the public interest. As Senator Milne said a short time ago, we should not come in here saying that we need to rip money off single parents, we need to delay the introduction of a disability insurance scheme, we cannot afford the rollout of large-scale renewable energy in Australia, we cannot afford the provision of decent public transport, we cannot afford to look after the environment or we need to set aside any of the many priorities that assail us across this country. We have the means to raise the revenue; we know that we do.

The beauty of a profits tax on an industry that does provide a substantial revenue base-and it certainly does in my home state of Western Australia-is that the tax does not kick in until you are doing extraordinarily well. That is the purpose of it. It is not a royalty receipt based on the tonnage that comes out of the ground. It only cuts in when you are doing very well. All the hysterical frothy hyperbole from those on other side of the chamber about how it is designed to assassinate the goose that lays the golden egg are basically them simply reading in statements from the big end of town, which is doing everything it can within the law-which they get to write-to avoid paying tax. It is a game that is probably as old as the concept of tax. It is not good enough for us to stand in here and pretend that there is nothing that we can do about it. As legislators, it is our job to do something about it. We in the Australian Greens take that job very seriously indeed.

 

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