❓ Question regarding the potential impact of a federal resource tax on Western Australia's ability to manage its resources and the fairness of GST distribution. Premier Barnett expresses concern over federal encroachment on state revenue and criticizes the proposed tax structure.
AnsweredQoN 348Legislative Assembly
QuestionView source ↗
HENRY TAX REVIEW — FEDERAL RESOURCE TAX
I refer to an article in today’s The Australian Financial Review regarding the Henry tax review, and specifically the proposal for a new federal resources tax to replace state royalties. What effect would such a system have on Western Australia’s ability to manage the resources of this state, which are owned by all Western Australians? Mr C.J. BARNETT
I refer to an article in today’s The Australian Financial Review regarding the Henry tax review, and specifically the proposal for a new federal resources tax to replace state royalties. What effect would such a system have on Western Australia’s ability to manage the resources of this state, which are owned by all Western Australians? Mr C.J. BARNETT
AnswerView source ↗
I thank the member for Carine for the question. Members would be aware that Ken Henry, the federal Secretary to the Treasury, is chairing a tax review. That is fine; we should constantly be reviewing taxes and looking at our tax system. I wonder why it is that every time the commonwealth government initiates a tax review, it talks about the tax incomes of the states. That is always what happens. Here we go once again. It has been suggested by Dr Henry and others that we need an additional federal resources tax—I thought that tax reviews were a way of getting rid of taxes—which presumably will be couched as a profit tax through the company tax system. I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr C.J. BARNETT replied: I thank the member for Carine for the question. Members would be aware that Ken Henry, the federal Secretary to the Treasury, is chairing a tax review. That is fine; we should constantly be reviewing taxes and looking at our tax system. I wonder why it is that every time the commonwealth government initiates a tax review, it talks about the tax incomes of the states. That is always what happens. Here we go once again. It has been suggested by Dr Henry and others that we need an additional federal resources tax—I thought that tax reviews were a way of getting rid of taxes—which presumably will be couched as a profit tax through the company tax system. I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I thank the member for Carine for the question. Members would be aware that Ken Henry, the federal Secretary to the Treasury, is chairing a tax review. That is fine; we should constantly be reviewing taxes and looking at our tax system. I wonder why it is that every time the commonwealth government initiates a tax review, it talks about the tax incomes of the states. That is always what happens. Here we go once again. It has been suggested by Dr Henry and others that we need an additional federal resources tax—I thought that tax reviews were a way of getting rid of taxes—which presumably will be couched as a profit tax through the company tax system. I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr C.J. BARNETT replied: I thank the member for Carine for the question. Members would be aware that Ken Henry, the federal Secretary to the Treasury, is chairing a tax review. That is fine; we should constantly be reviewing taxes and looking at our tax system. I wonder why it is that every time the commonwealth government initiates a tax review, it talks about the tax incomes of the states. That is always what happens. Here we go once again. It has been suggested by Dr Henry and others that we need an additional federal resources tax—I thought that tax reviews were a way of getting rid of taxes—which presumably will be couched as a profit tax through the company tax system. I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I thank the member for Carine for the question. Members would be aware that Ken Henry, the federal Secretary to the Treasury, is chairing a tax review. That is fine; we should constantly be reviewing taxes and looking at our tax system. I wonder why it is that every time the commonwealth government initiates a tax review, it talks about the tax incomes of the states. That is always what happens. Here we go once again. It has been suggested by Dr Henry and others that we need an additional federal resources tax—I thought that tax reviews were a way of getting rid of taxes—which presumably will be couched as a profit tax through the company tax system. I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I will make a few observations about that. Firstly, royalties are not a tax; they are the price that a state charges to sell minerals to companies. It is not a tax; it is a selling price. There is a fundamental misunderstanding by the Henry review if it equates royalties to being a tax. There might be different systems of royalties but basically it is the price that we charge to sell petroleum and minerals. Secondly, various changes have been made to the tax system. The commonwealth government likes the idea, for example, of the petroleum resources rent tax. That is a profit-based tax that the federal government levies on offshore oil and gas. That system happens to work comparatively well for oil. It was introduced following the two price spikes in oil during the 1970s, and it captured for the Australian people some of that windfall gain. However, it does not work too well for offshore LNG. The major LNG projects being promoted in this state that will take gas from commonwealth waters will pay little or nothing for the gas resource over the first 10 years of the project. That is not a particularly smart system. The federal government is basically taxing profit when it accrues, but the deductions up-front are so great that for up to 10 years nothing is paid for the resource. Australia is the only country in the world that allows that to happen; no other country permits that. I do not think that is smart. I would hate any regime such as that to be applied to minerals. The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
The other point I make is that we can see how big business in Australia would use this. Once we took away a charge based on the mineral—the actual physical product being sold—and placed it on profits, a corporate entity could use losses, perhaps in another state and maybe even overseas, to try to offset its profit on its mining operation and it could basically end up paying little or nothing. Its ability to manipulate would be far greater than what might exist today. We have seen oil projects develop in this state under the commonwealth resource rent tax regime whereby the projects have been developed and the oil extracted and exported, and not a dollar has been paid to any government in Australia for that resource. There are major deficiencies. I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
I go back to the last major reshaping of tax revenues in this state. Yes, it happened under Liberal governments, both federal and state. I refer to the goods and services tax. The gst was a sensible tax reform for Australia. The states, quite willingly and openly, saw that it would provide long-term security. The GST was not a new revenue source for the state; it replaced the tax-sharing arrangements on company tax and income tax. But it was to provide growth tax for the state and stability of state revenue. That is what we all thought; that is what we openly entered into. Western Australia has 10 per cent of the nation’s population. One would think that on a fair basis we would get back 100c for every dollar paid in GST; that people in Western Australia would pay GST and we would get it back. Because of the Commonwealth Grants Commission process, Western Australia’s share, even though it has more than 10 per cent of the nation’s population, is now down to 8.7 per cent. On projections, it will fall to 5.7 per cent. Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr E.S. Ripper interjected. Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
Mr C.J. BARNETT : The Leader of the Opposition can laugh, but it is a serious issue. Members in this house need to understand that if the current trend continues, Western Australians, when they pay a dollar in GST in this state, will receive 57c back from the commonwealth. That is the scenario we are in. Imagine how this state would be ripped off if a federal Labor government imposed a resources profit tax on our mining industry—on our state-owned resources. I assure members that this government is happy to talk about tax reform and better tax regimes, but we will never hand over mining royalty income to the commonwealth. We will never do what the Labor Party will probably agree to if it ever gets the chance.
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