Second Reading – Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023
Mr PITT: The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 is a complex bill, but I’ll be focusing my remarks on the PRRT, the petroleum resource rent tax, deductions cap. In terms of the complexity—to give the House a bit of an indication—here’s just one section of the proposal:
A person to whom the deductions cap applies will be taken to have a taxable profit of 10 per cent of their assessable receipts derived in relation to the project and the year of tax, with PRRT being payable on this amount of deemed taxable profit. That person will be taken to incur augmented denied deductable expenditure on the first day of the next financial year.
It has always been a very complex methodology.
On our side of politics, we stand for lower taxes. To me that is a value of our party. It is not a guide. It is not something that we should throw away loosely or carelessly. It is of value, in my view, and that value is one that I’ll stand up for in this circumstance. I’ll be opposing the government’s original proposal on that basis and for a range of other reasons, which I’m about to outline. Fundamentally, this is a proposal about an additional $2.4 billion worth of tax to be garnered by the Labor government from the offshore industry. This is an industry which is under attack by this government. It is outrageous: the things that they say compared to the things that they do.
To give you an example, for the mining and resources sector, according to the ninth annual Corporate tax transparency report, the tax payable by the mining and energy companies amounted to $42.4 billion in 2021-22—in one year alone.
It was a staggering 50.6 per cent of all corporate tax collected in Australia during that period. Some may say that’s a one-off, but it’s not. To give you an indication over a period of time, between 2012-13 and 2021-22, according to the Royalty and company tax payments report by EY, the sector paid a staggering $295 billion. But apparently, according to those opposite, that’s not enough.
The industry is getting penalised from every single direction, and, in my view, this will be the feather that potentially breaks the camel’s back. It is quite incredible. Let’s look at some of the things that this government has done that directly impact the feasibility, the profitability and the availability of the essential resources that this country not only needs but relies on for taxes and royalties to pay for the roads, schools and hospitals that this country requires and in fact our citizens deserve. Here’s the first one: the safeguard mechanism will ratchet up by five per cent every year to 2030. That sounds like an interesting sort of description—’safeguard mechanism’—but what it does is it guarantees an increase in costs, and, at some point between now and when this policy comes to fruition in its entirety, these businesses will become unprofitable, particularly if they’re in the cement industry. We’ve already seen the aluminium industry say that it resulted in a writedown of over a billion dollars of their aluminium assets and their production assets, and we see an attack on offshore through this change in PRRT and also the safeguard mechanism.
Because of that safeguard mechanism, every board, in my view, is working out at what point their business becomes unprofitable, at what point they can’t meet these requirements and at what point they’re going to have make very, very difficult decisions. It’s not only those decisions but also final investment decisions already made in an industry where it can take up to 10 years in terms of lead time through to production. Once again, this Labor government is moving the goalposts. They’ve moved the goalposts on the safeguard mechanism, and now they’re proposing to move the goalposts on taxes that affect offshore through the PRRT. What will they do with that money? Here’s one expenditure: they give nearly $10 million to the Environmental Defenders Office, who many here may not have heard of, and then they give them more than $2 million a year ongoing. What does the Environmental Defenders Office do with that money? It attacks offshore and mining projects, looking to stop them through the courts. So taxpayer money goes to apply lawfare against projects that employ literally tens of thousands of Australians and pays them very, very well for their technical skills and expertise.
I have two examples. The Barossa, up off the Northern Territory, was a $5 billion project. It was roughly halfway expended—it might have even been further than that—and the Environmental Defenders Office found a gentleman in the Tiwi Islands who the courts determined hadn’t been consulted enough. That project got parked up. You think about what the cost impact has been not only to that company but to the shareholders, who are, in the majority, Australians. They’re the Australian people. They’re Australian superannuation funds. They’re the ones looking for a return for their superannuation, in particular, into the future. The project is parked up because of action by the Environmental Defenders Office, which is funded by the taxpayer through the Labor government budget. So you have an attack through the safeguard mechanism and you have an attack through additional taxation on offshore assets, which have significant lead times, decision times and expenditure. The gas from the Barossa project is required to keep the Darwin LNG plant open. For the 20-year refit of the existing Darwin LNG facility, it needs backfill gas and it has to come from this project because the lead time is so long, and now it’s held up in the courts.
Now we see Woodside, who took a final investment decision on Scarborough, a roughly $15 billion project. Admittedly, while I was the minister, I was very pleased about that. This is a significant investment in Western Australia, a resources state that relies on this industry for its economy, for royalties and taxation and for employment. Now they find themselves in a court battle, similarly, with someone funded through the Environmental Defenders Office to attack the project and to stop it on the basis, if I recall correctly, that there were whale songs that might be affected or impacted.
I don’t understand what that means. I know that, as part of the process, before they get an approval from NOPSEMA and others, they have to have demonstrated that they’ve achieved consultation and they’ve done all that sort of work. But now we see another $15 billion project held up by a group, which is funded by the taxpayer, under this Labor government, that now wants to take more tax from this industry—not less tax, more tax—and put these projects at risk.
On top of that, they’re getting the tax through what’s allegedly a ‘closing the loopholes’ bill on industrial relations. And these decisions are already taken. To retrospectively go back to an industry which invests significant amounts of money, to see the Japanese ambassador saying that there is now a sovereign risk for investment in Australia—one of this nation’s greatest partners for trade, for export and for investment—is just extraordinary. It is astounding. Does the government not understand what that means?
You need tens of billions of dollars of investment to make these projects occur. Without them, there will be a gap in production, and that gap will be in gas. And without gas, guess what? Well, you can’t make kayaks, you can’t make neoprene wetsuits and you certainly can’t make fertiliser. This nation also relies on agriculture, which needs a fertiliser price that is competitive. Otherwise, they simply can’t compete. They can’t buy what’s necessary, they can’t deliver it and they can’t grow food. If the sovereign risk is too high, if these projects fall over, if the companies decide not to continue their investment—and I know there are some people in the chamber who might think that’s good outcome—why would anyone else come here and invest in the sector in this country?
If we look at some of the information put forward by the Minerals Council—and these are their numbers around global mining and investment required to reach net zero—guess what? You need US$4 trillion by 2030. You need 140 additional copper mines, 60 nickel mines, 50 lithium mines and 17 cobalt mines. I’d like to see them in Australia, but why would anyone come here and invest to then find that they have a government that will retrospectively change the rules that impacts their profitability and their ability to actually deliver these projects, that impacts their ability to hire anyone, pay them and pay the taxes? This is quite an extraordinary turn of events.
What else will we see? We’ll see even more of the taxpayers’ money, some of which I’m sure will go towards this appropriation, this additional taxation, from the ‘Minister for Energy Secrets’ who won’t tell the Australian people how much that will be. Minister Bowen has proposed that the taxpayer will prop up and fund and guarantee a rate of return for intermittent wind and solar projects in this country that no-one knows about. Companies won’t build them, because they’re too high risk; they’re unreliable and they’re an unknown price. Things are moving. The cost of money has increased. Inflation is going up, interest rates are going up and the cost of construction is going up—the cost of everything is going up! But Minister Bowen’s proposal is to take the taxpayers’ money, of an unknown amount, and guarantee a rate of return for investors. That will be union and industry super funds. That will be international companies. They are the ones who will then build projects that currently aren’t technically nor economically feasible, yet this government wants more money and more taxation to do secret deals on a return for projects that won’t work, at a time when the country will need gas in the future because, quite simply, these projects take years and years to deliver.
I ask you: Would you build a house under this government? Would you sign a contract knowing that the government could come back and change their mind? Look at the impact on you as an individual, on the money that you would put forward for the next 10, 20 or 30 years, only to find that that those costs that you thought were right were wrong. They’re not wrong because of an estimate or a decision that you’ve taken but because the government of Australia has decided that they will change the rules. They will increase taxes. They will increase green tape and red tape. They will increase costs through the safeguard mechanism. They will fund the Environmental Defenders Office. They will change industrial relations rules, which will make it even harder to deliver these projects. And for what? To what purpose? You cannot expect significant investors to come to Australia and invest in this country if the rules keep changing for projects they’ve already decided on.
If we look at what happened in Queensland, the LNG industry there was built in under a decade; some $50 billion was invested. That was done and started and initiated under the previous Labor government, under a Gillard led government.
As a result, we have LNG export terminals—three at Gladstone—we have significant exports out of the Northern Territory and Darwin, and we have a significant export out of Karratha and out of WA. All those plants need to ensure they have a supply of gas. If the lead time is 10 years and you make a decision now, in 10 years time you may or may not get the gas. But we can absolutely guarantee that if you change the rules to a point where they simply can’t make any money and the project is not feasible, they will not build it. These companies will not build it.
No matter what else this government puts forward, they can’t continue to retrospectively change the rules for investors. And who pays the bill? It is the Australian people that will pay. They are the ones that will get higher prices for gas, they are the ones who’ll have higher prices and unreliable electricity, and they are the ones who are shareholders in these businesses who get less returns because more taxes are taken out. How much more does the Treasurer think he might need? Forty billion dollars in a year, more than 50 per cent of all corporate tax take, is quite astounding, and they want to attack the industry paying for the things this nation needs.
I will leave my remarks there, but I will reiterate what I said at the outset: I will be opposing Labor’s proposal regardless of what discussions, negotiations or other things might happen, because it is fundamentally wrong. If we stand for lower taxes, we stand for lower taxes. It is a values decision. I would urge the government—I would implore them—to stop attacking Australia’s biggest employing industry. One point two million Australians rely on the sector for a job. It is a job that pays extraordinarily well, and that is how those Australians pay their mortgages, educate their children and ensure their life is well lived and a contributor to this nation.