Speech – Mining Tax
Mr BILLSON (Dunkley) (11:11): It is a pleasure to discuss these important resource tax bills—the bundle of them that are before the chamber today—and to follow the member for Eden-Monaro claiming some world-class championship performance from the Labor government. He did not actually mention, though, that there have been 300,000 jobs lost in small business since the election of Labor. More than 20,000 fewer small businesses are now contributing to our economy, yet it is the small business community that Labor seeks to use and misuse as the justification for this cash grab from the mining sector.
I will come back to the implications of a number of these bills for the small business community, but is very interesting to hear Labor members talk about all the goodies they claim will be funded from this mining tax and try to blissfully skate over the complete confusion and lack of certainty about just what revenue this mining tax will raise, about how the government has failed to provide any credible modelling for the revenue streams that will flow from this measure, and about how it persists in asserting certain revenue will come into the Commonwealth coffers when all the industry analysis and all the companies that have an obligation of continuous disclosure to the share market are making different claims. Everyone is looking around wondering just which mining companies are going to be paying this tax. It is quite amazing. We hear that this is designed to target the ‘big three’, but the big three miners have done quite a deft move on a Prime Minister out of her depth in the negotiations on the minerals resource rent tax.
The concessions the government has entertained in order to achieve peace have brought a great grin and a great smile to the big three miners because they have done over the government—and you know that, Mr Deputy Speaker Scott. There are concessions around offsetting and rebating state royalties—royalties being the cost of the goods, the price paid by miners to extract these minerals; the very thing that the government claims it is addressing. So when state governments—the proper jurisdiction that holds the Crown’s interest in these resources—choose to increase royalties, those states are then penalised by the Commonwealth through the Grants Commission process, and the miners are inoculated as well because it is rebated against the minerals resource rent tax. These resources—and I will quote the Labor language here—are ‘the property of the Australian people’, and that property right is exercised through the state governments, and the decision about the price at which those resources are made available is the level of royalties. So, in the very design of this tax, whenever the state governments exercise their constitutional responsibilities to revisit the cost of goods they get penalised by the Commonwealth—not to the disadvantage of the mining companies but to the disadvantage of the state governments doing what they are constitutionally obliged to do. It is interesting that you hear the Labor government and its members talk about Herculean profits being the motive and the ‘big three’, but the big three have managed to cut a deal that cuts them out of the impact of the mining tax for at least the forward estimates.
They have been able to say, ‘Offset any royalty movements,’ and the government said that is okay. Then they said, ‘Apply the tax to EBIT, earnings before interest and taxation.’ That is a great idea if you are a big miner that has not had to borrow money to undertake the project, because you have no interest payments. So they think that is fantastic. But other miners that have had to borrow funds to undertake a mining project are going to cop it in the neck. That is a big win for the big miners, who can draw from their own resources to finance a project. The third thing is the opportunity for the big mining companies to depreciate their assets all over again. These long-run and, in the words of the government, highly profitable mines have been depreciated, often with accelerated depreciation and other allowances, to a point where their book value is quite minimal. Those miners can now revalue those mines, mark them to market and start depreciating them all over again. So what they have done is absolutely stooge the government about these concessions to the point where they will not be paying any of this tax. We have seen that reported in market analyst reports and in reports to the stock market.
So where is the money going to come from? The government refuse to disclose that. With all this uncertainty and the fiction about the revenue streams this is going to generate, not only have the government gone and spent all that fictitious revenue; they have gone and spent a whole lot more. On the assumption of a 140-year high in our terms of trade—that is, where we are getting the highest return for our resources compared to what we are spending on imports—having let the big miners off the hook by being outsmarted and then spending more than the fictitious amount of revenue the tax is going to raise, the government comes in here and spruiks the supposed benefits of the tax. What the benefits are doing is simply adding to the already enormous structural deficit in the Commonwealth budget. What the government are doing is again overspending money they have no certainty they will receive on conditions that they hope will stay the best they have been in 140 years and then they end up overspending money they are not going to get anyway. That is what this is about. This is why people are rightly concerned about how hamfistedly and incompetently the government has gone about the various incarnations of this mining tax.
What is interesting too is that this attack on the royalty system is actually about the Commonwealth government saying to the states and the miners: ‘We don’t think the cost of goods matters any longer; it is about the profit that is derived from them.’ If you are a well-run mine that is generating profits, you will be paying more in tax. If you are not running so well and you are not making big profits, you will be paying less tax. But if the state says, ‘Regardless of whether you are profitable or not, these finite natural resources have a value that is captured in the royalty as the cost of goods,’ they are giving away that proper valuation of the cost of those resources by the very design of this system. They are saying to the states, ‘We’ll punish you if you want to apply a higher cost of goods for these scarce natural resources.’ But if the company makes a hash of the way in which they extract those resources and cannot derive major profits, the resources will actually generate less for the Australian taxpayer than if they happen to be extracted by someone who is operating profitably.
So you have multiple values for these scarce resources depending not on the value of the commodity and what it might reap in the international market but on how profitable the company that extracts them is. So you are actually devaluing those natural resources by saying royalties, the cost of goods, do not matter any longer and if a state government goes there you are going to punish them for it. What a bizarre approach it is when government tries to argue that it is all about securing proper value for those scarce resources for the Australian public when they are actually putting aside and penalising the very mechanism that ensures we get proper value for those resources regardless of how profitable the company extracting them might be.
But also embedded among these 11 bills are some other quite extraordinary changes. I do not know whether people realise that the 400,000 smallest businesses in Australia are going to cop it in the neck because of these bills. Phillip Hudson captured it perfectly in this Herald Sun headline on Monday: ‘Small business tax bomb’. Whilst the government runs around saying this is going to be great for small business, in these bills is the removal of the entrepreneurs tax offset—a 25 per cent discount on the tax paid on the incomes of our 400,000 smallest businesses. These are home based businesses, micro-enterprises, start-up retail operations, even people juggling part-time work with retirement who might consult and bring in a little bit of income. That 25 per cent discount is being ripped away by this package of bills. People earning incomes of up to $50,000, which is not an enormous income in anyone’s mind, are going to be paying 25 per cent more tax because the removal of that 25 per cent discount, being the entrepreneurs tax offset, is part of this package of bills.
You do not hear the government saying anything about that, do you? What an enormous surprise that will come as for a home based business, for a retailer just starting out, for someone who might offer their skills and experience as a professional service provider, for someone postponing retirement while they work a few days a week and maybe consult. You do not hear any of that. The government wants to maintain the fiction that what it is doing is good for small business. These are some 400,000 of our smallest businesses. Those that earn up to $75,000 get some benefit; the offset tapers out at $75,000; no ETO is available above an income of $75,000. But people earning up to $50,000 get the full 25 per cent discount and it tapers down as income increases to $75,000. They are going to get a tax bill rise. Many of them will get a tax bill rise of well over $10 a week and for some of them it is as much is $16 a week. But you never hear a word from the government about that. This is supposedly the package that is great news for small business. This package is supposedly spreading the benefits of the booming mining sector. The big three, who I have already outlined, expect to pay no extra tax, and may even end up paying less, yet the 400,000 smallest businesses in Australia will be paying more tax.
That is how we are spreading the benefit. We are giving it in the neck with a small business tax bomb by the abolition of the entrepreneurs tax offset while the big three miners laugh at the government’s incompetence for caving in on deals that mean they will be paying hardly anything under these new arrangements.
But it gets worse. The government then goes and talks about things like the accelerated depreciation that is available for some small business purchases. I am all for helping small business out and tax changes need to be beneficial and affordable. I have already touched on the structural deficit that puts a big question mark over affordability. But if you are cash-strapped small business, what comfort would you gain from the Treasurer telling you, ‘You can rock on out and go and buy a new car and there will be cash-flow benefit.’? What kind of warped logic tells you you spend $30,000 on a new ute to get $1,500 or $1,600 back as a cash benefit? What sort of cash-flow ignoramus would come up with such an assertion, that that is cash-flow positive for a small business? Spend 30 grand of your cash, no matter how cash-strapped you are, and you might get $1,600 back. What a cunning plan. I wonder how many small businesses have thought that is good for their cash flow. But that is embedded in here as well and that is being sold as another advantage: spend a lot to get a little back, in the context of small businesses doing it really hard in this difficult economic climate where there seems to be no-one interested in their plight within the government ranks.
It goes even further. You heard earlier speakers talking about the increase in the superannuation guarantee contribution, as if the mining tax is going to pay for that. News flash to the Labor members: employer funded superannuation is funded by employers. So when the government is running around saying to Australian working men and women, ‘You’re going to get extra super and the mining tax is going to pay for it,’ uh uh, not right. Employers will be paying that. Let us go back to that cash-strapped small business. They are going to have a three per cent increase in their payroll costs. There is no locked-in trade-off for reduction in wage claims, not like the Accord days when the unions and the Labor government of the day said, ‘We will deny working men and women full wage increases. We will offset them by an increase in superannuation contributions.’ There is no trade-off of that kind whatsoever, just an added cost on small businesses trying to survive and create opportunities for others in a very difficult trading environment.
We have rightly said we will oppose that because the Henry tax review did not even recommend that change. They actually said that with the current contributions through the superannuation guarantee levy you can achieve improved adequacy and coverage for retirement incomes by looking at the way contributions and earnings are taxed. The Henry tax review did not advocate an increase. I understand that the Henry tax review was sensitive to the limited capacity for particularly small businesses to keep paying more and more and more at a time when their profitability and their viability are under great duress. That is why the opposition opposes that measure, because the outcome it seeks to achieve can, according to Henry, be achieved in another way that does not make a difficult situation even worse for small business. But we cannot get hold of any of that Henry tax review modelling despite it being $22 million worth of work funded by the taxpayer. The government keeps it so close that you cannot even tease these things out. The government wants to push on with this plan and then criticises the opposition for saying, ‘If you legislate for these changes and then they are factored into future wage arrangements, unravelling that is a pretty challenging thing to do.’ The smart thing to do is not proceed with it at this time and actually bring out the Henry tax review recommendations.
So let us have none of this fiction that this is somehow sharing the benefits of the mining sector. Let us have none of this nonsense that this package is good for small business, because at every turn it is a pea and thimble trick where the benefits are modest and the impacts are severe. It just goes to show that this government does not understand small business and does nothing to help them out in these difficult times. (Time expired)