Preliminary Pages
Chair’s foreword
Australia is experiencing an unprecedented mining boom with
high levels of investment and profit. Mining companies generated profits of
$92.8 billion to June and plan to invest $430 billion to expand their
industry. In the last decade mining profits have jumped 262 per cent.
The Australian Government has taken the view that the
massive profits of the mining sector should be more fairly taxed and the
proceeds returned to all Australians. This is consistent with the evidence the
committee received during the inquiry. United Voice stated, ‘There is a
substantial gulf between the perceived benefits of the mining boom and some of
the actual impacts on our economy, environment, health and the day to day lives
of Australians.’
The Mineral Resource Rent Tax (MRRT) will be a tax on mining
profits. The proceeds of the tax will fund critical infrastructure, a cut in
the company tax rate for small business, and make it possible to increase the
superannuation guarantee from nine to 12 per cent.
Resource rent taxes are much more efficient than royalties.
The Australia’s Future Tax System Review found that royalty regimes were the
most distorting taxes in the Federation.
The Minerals Resource Rent Tax Bill 2011 and the related
bills implement important reforms to the Australian economy. They:
n apply a 22.5 per cent
Mineral Resource Rent Tax (MRRT) on the profits that mining companies make on
iron ore and coal on their mining activities only (excluding value adding
activities such as transportation and concentration);
n extend the Petroleum
Resource Rent Tax to the North West Shelf and the Australian mainland;
n increase the
superannuation guarantee from 9 per cent to 12 per cent, remove the age limit
of 70 for the superannuation guarantee, and implement a superannuation
contribution for low income earners of up to $500 annually; and
n give small businesses
simplified and greater up-front tax deductions for assets.
Although not formally a part of the package, the Government
has also announced that it will decrease the company tax rate for small
businesses from 30 per cent to 29 per cent.
These reforms recognise that mineral resources belong to all
Australians and it is only right that the profits from the mining boom be
shared more widely.
During the inquiry there were differing views on how the tax
would affect emerging miners, compared with established miners. Emerging miners
believed that they would be paying a large amount of the revenue under the MRRT
and that large miners would pay very little, due to the larger starting base
that established miners have available to them as a deduction against the MRRT.
However, Treasury advised the committee that:
The value of the resource, to the extent that it is reflected
in the starting base, will be reflective of the expected future cash flows from
the exploitation of the resource, so they will be proportional. If you have a
large starting base you would expect to have large revenue flow, and if you
have a small starting base you will have a smaller revenue flow.[1]
The committee is confident that the MRRT will operate as
intended.
Importantly, the other elements of the package deliver significant
benefits to the Australian economy as a whole. Small business confirmed that
the improved deductions will help them with their cash flow and make it easier
for them to obtain finance to invest in their businesses during the two-speed
economy. Business Enterprise Centres Australia said, ‘we have small business,
which is the backbone of the economy, struggling. There has to be a
redistribution of that wealth.’
The MRRT will also fund substantial infrastructure
investment in regional Australia through the Regional Infrastructure Fund.
The superannuation industry confirmed that Australians
support compulsory saving for their retirement and that the Bills will help
address the savings gap that currently exists for the great majority of
Australians. The Financial Services Council stated, ‘the current superannuation
guarantee rate is at nine per cent and that will fail to provide people with
their expectations of a comfortable retirement.’
Low income earners stand to significantly gain from the
Bills. Unlike the majority of Australian workers, 3.5 million Australians on
low incomes receive little or no tax benefit from contributing to super because
their marginal income tax rate is equal to, or below, the 15 per cent tax
applied to superannuation. The low income superannuation contribution in the
legislation will distribute superannuation tax concessions more equitably.
The Bills implement important long run reforms to the
Australian economy and ensure that all Australians will benefit from the mining
boom. They should become law.
I would like to thank the organisations that assisted the
committee during the inquiry through submissions or participating in the
hearings in Canberra. I also thank my colleagues on the committee for their
contribution to the report.
Julie Owens MP
Chair
Terms of reference
On 2 November 2011 the Treasurer, the Hon Wayne Swann, MP,
in accordance with Standing Order 215 (c) referred the following bills to the
committee for inquiry and an advisory report by 21 November 2011:
Minerals Resource Rent Tax Bill
2011
Minerals Resource Rent Tax
(Consequential Amendments and Transitional Provisions) Bill 2011
Minerals Resource Rent Tax
(Imposition—General) Bill 2011
Minerals Resource Rent Tax
(Imposition—Customs) Bill 2011
Minerals Resource Rent Tax
(Imposition—Excise) Bill 2011
Petroleum Resource Rent Tax
Assessment Amendment Bill 2011
Petroleum Resource Rent Tax
(Imposition—General) Bill 2011
Petroleum Resource Rent Tax
(Imposition—Customs) Bill 2011
Petroleum Resource Rent Tax
(Imposition—Excise) Bill 2011
Tax Laws Amendment (Stronger,
Fairer, Simpler and Other Measures) Bill 2011
Superannuation Guarantee
(Administration) Amendment Bill 2011
Recommendation
4 Sharing the benefits of the mining boom
Recommendation 1
That the House of Representatives pass all 11 Bills in the
package, namely:
n the Minerals Resource Rent Tax Bill 2011
and the four related minerals Bills;
n the Petroleum Resource Rent Tax
Assessment Amendment Bill 2011 and the three related petroleum Bills;
n the Superannuation Guarantee
(Administration) Amendment Bill 2011; and
n the Tax Laws Amendment (Stronger, Fairer,
Simpler and Other Measures) Bill 2011.