Federal Government's Mining Tax
Monday, 24 May 2010 13:08
May 19, 2010
Dr FLEGG (Moggill—LNP) (6.05 pm): The federal government taxed alcopops to reduce drinking.It heavily taxed tobacco to reduce smoking. But now it is seeking to convince us that by heavily taxing mining it will not discourage mining—the same sort of stupidity we have in the amendment from the government and the sell-out from the member for Mount Isa of her resource-rich electorate! Minerals and energy extraction account for 70 per cent of this nation’s export earnings. It underpins our national income and our standard of living. It is one of the key reasons, along with the financial prudence of the Howard government, that Australia entered the global financial crisis in such a powerful condition.
Anyone who thinks that this incompetent act of heavily taxing miners in excess of the levels that prevail in other competitive countries will not seriously damage this country and Queensland in particular is fooling themselves. We have already seen a flight of capital from Australia—dumping of mining shares and a significant devaluation of the Australian dollar, which approached 85c today from a recent high of 92c just days ago. That is a flight of capital because of loss of confidence in this country. Commentators have been quick to realise the dangers. BT’s senior portfolio manager said—
Effective tax on the mining industry moves from the mid 40s
—that is, per cent—
to the mid 50s and makes us materially higher than any other country in terms of tax rate.
She also went on to say there was limited consultation and that the tax is retrospective. This country learnt a basic rule of financial competency the hard way, and that rule is that in a global market you must be competitive. We went through a painful adjustment under the Hawke and Howard governments through micro-economic reform in the areas of taxation, dividend imputation, waterfront reform, tariff reform and industrial relations to try to give this country a better financial base and keep it competitive. The incompetent Rudd government cannot read or learn the lessons of history, even those learnt by previous Labor governments. JP Morgan analyst David George said—The imposition of the tax will destroy a lot of wealth in Australia’s mining sector.
We have already seen that for superannuation funds, but we will also see it in loss of jobs and loss of tax revenue to this state government and the federal government. Moody’s investment service said the fallout could be similar to what happened in 2008 in Zambia where mining exploration reduced after a similar windfall tax was introduced. The following year Zambia had to repeal the tax, hoping to reignite its mining exploration industry after it collapsed just a year before with the introduction of such a tax. Not only can the Rudd government not learn the lessons of history; it cannot even observe what is happening now in other parts of the world. Australia’s third largest iron ore producer, Fortescue, has placed two projects worth $10.5 billion and $7 billion respectively on hold. Its principal, Mr Forrest, said—We can’t find a way that we can maintain our Australian equity in these projects and still develop them under this highly theoretical new tax. I do regret to say that any project we can’t get going before the tax cuts in will not continue.
OZ Minerals has put on hold its Western Copper project. And if members are tempted to think it will not happen in Queensland, Santos has already warned that its $7.7 billion Gladstone liquefied natural gas joint venture is under a cloud and that it requires more information in relation to the government’s new tax before a decision is made that it can proceed. There are 5,000 Queensland jobs at stake in that one project alone and it is on hold.
Rudd’s definition that a super profit is anything that exceeds the risk-free government bond rate betrays his attitude that private businesses are not entitled to a return for the risks that they take. The LNP believes that miners and gas companies that are prepared to take those risks are entitled to a return. It is hard to argue that miners, already paying 45 per cent, are not major contributors. The LNP knows that in a competitive world, if your tax regime is uncompetitive, investment and customers will look elsewhere.(Time expired)