For a substantial part of our history mining has been a source of national prosperity and therefore of great political significance. The Eureka rebellion in 1854 was a revolt by Victorian miners against excessive taxation and regulation by the government of the day. The symbol of that rebellion, the Eureka flag, has remained a perennial favourite with all sorts of minority interest groups and antiestablishment causes from ultra-right nationalist classes to warring trade unionists and everyone in between. Along the way the true origins of the conflict have all but disappeared, but in the minds of most people it exists as nothing more than a non-specific instance of the true-blue Aussie battler sticking it to the man. The fact is that the Eureka rebellion was a revolt by Victorian miners primarily against what they saw to be excessive taxation and regulation by the government of the day. So from the earliest days of our nation's history mining has been a hot button issue. It is remarkable how today very little has changed.
After coming to office in 2007 former Prime Minister Kevin Rudd and the Treasurer commissioned a so-called root and branch inquiry into the nation's taxation arrangements. One outcome of that review was a recommendation for a resource superprofits tax. Strangely enough, the profits tax proposed by the government did not really look much like the one suggested by the Henry review. Having been taken completely by surprise, the mining industry launched a campaign to have the superprofits tax abolished. I do not imagine in their wildest dreams they would have thought they would have been so successful. Not only did they succeed in having the tax shelved; they also played a huge role in bringing down the Prime Minister of the day.
After Prime Minister Rudd's removal the new Prime Minister, Julia Gillard, promised she would negotiate with the mining industry over the massive taxes. Instead, she cut a backroom deal with the three big miners—Rio Tinto, BHP and Xstrata—and left the various state governments in the dark and another 320 mining interests out in the cold. The result of that deal is the legislation we have before us today, the Minerals Resource Rent Tax Bill 2011.
The amount of money that the country will supposedly make from the tax appears to be a little uncertain at the moment. Over the first year since the mining tax was first announced revenue estimates jumped from $12 billion under the original RSPT, to $24 billion under the RSPT with revised commodity price assumptions, to $10.5 billion after the Gillard mining tax deal and more recently to $7.4 billion thanks to changes in the exchange rate. So we have a bouncing ball from $12 billion to $24 billion to $10.5 billion and $7 billion. The most recent figure is $11 billion, minus the $3 billion that the federal government will have to reimburse the states, leaving around $9 billion of revenue. Nevertheless, revenue from the proposed tax has been included in the Commonwealth budget since 2010-11 despite the tax not coming online until 1 July 2012.
Here is where things get rather more interesting. According to Treasury, the revenue derived from the MRRT and the expanded the PRRT will decline over time; however, the cost of the budget measures the MRRT is supposedly paying for will increase over time. Have you got that? The costs are going to go up in the future as the revenue stream dwindles.
Furthermore, the key assumptions underpinning these taxes remain a secret. What is the government up to in not releasing the data? I can forgive people in Australia who think that the concept of this tax is sound and good value because we are taking money from the mining companies and giving it to the poor—it is a Robin Hood type of tax—but let us look at what we are being sold here. Exploration in our resource sector is at 140-year peak. This government would have you think that its tax has actually stimulated the resources sector.
It is not often that you will hear me say complimentary things about the government in my home state of Queensland, but at least they provide details of the assumptions underpinning their mining royalties and allow proper scrutiny of their revenue estimates. Instead, the Gillard government remain intent on keeping the figures under wraps. Why? What are they hiding this time? They had to be dragged kicking and screaming to release the modelling behind the carbon tax. They had to be shamed into releasing the updated figures. That is because the only figures the government care about are the polling figures, and at the moment they are not that flash.
The rest of it is just grist to the mill, just interchangeable sets of numbers to be twisted and manipulated according to the political imperatives of the day. All of this necessitates the employment of legions of spin doctors who are all tasked with manipulating the shoddy truth into something resembling a good-news story. How far down this path do you really want to go? It is government of the spin doctors by the spin doctors. For goodness sake, it certainly is not for the good of the nation.
You blokes should listen to your former leader Mark Latham. Last week he gave half of your frontbench a spray. Quietly in the corridors some of your parliamentary colleagues agreed with Mark and said he speaks the truth. But the government, try as they might, still have not been able to move on from the glory days of 2007 and the old 2020 talkfest. They like to talk about reform, but all they ever do is announce more inquiries, more reviews and more reports. They commission a review and then ignore the recommendations. That seems to be the modus operandi of the Labor government. This very day in the parliament we saw yet another committee being formed.
This government likes to talk a lot about reform, particularly tax reform, but as ever the reality does not match the rhetoric. As I have said in the past, Labor's idea of tax reform is to introduce new taxes. I have lost count of how many we are up to now, but I believe there have been around 19 or 20 new taxes or increases in tariffs.
Much like the others, the MRRT has so many shortcomings it is hard to know where to start, but I will give it a shot. For starters it introduces another new tax on an important industry on top of the existing royalty and income tax arrangements, making our tax system more complex and less fair. It also reduces our international competitiveness as an attractive investment destination. We are already seeing junior and mid-cap miners moving future investments offshore. As the lead time for mines can sometimes be up to five or 10 years, it is the future resources sector that will suffer particularly as China's growth comes off and demand softens. It also gives an unfair competitive advantage to the big three multinational, multicommodity and multiproject companies who were given the exclusive opportunity by the government to negotiate the design of its new tax with all their competitors and stakeholders locked out of the process.
This tax makes the federal budget become a hostage to decisions made by state and territory governments about their royalty arrangements. Predominantly that means, whatever the government puts in the Mid-Year Economic and Fiscal Outlook document, it will be held hostage to whatever state government royalty amendments are made and the federal government will be left hanging onto the bag. It raises serious and unresolved constitutional issues and links a highly volatile and downward-trending revenue stream to a suite of budget measures, the costs of which are projected to increase, thereby worsening the Commonwealth budget strategy and structural deficit over time.
At the last count I think our revenue streams were to be $11 billion. The $3 billion that the government will have to credit will leave around $9 billion revenue. The forecast expenditure for savings from the MRRT will be around $14 billion. As that revenue comes off, the government is going to be caught, and I would not mind betting London to a brick that when the MYEFO document comes out the figures will be changed again. It is going to be up to the coalition, when we get to government, to clean up the mess.
It is the last point which gives me the greatest cause for concern. The government have proposed various associated measures which will become increasingly costly over time to fund by a tax which could be dramatically impacted at any time by increased state government royalties. These deficiencies completely refute the government's argument that their proposed changes create a more efficient tax system. The original concept of a resources rent tax was investigated by Ken Henry and recommended negotiations with the states and territories. This government went ahead and conducted their negotiations with the big three without them. So much for the rhetoric of expert advice that the government cling to! To this day there has been no consultation with the state and territory governments about the implications of a mining tax for them, despite the fact that the resources royalties represent 20 per cent of the Western Australian government's revenue, nine per cent of the Queensland state government's revenue and six per cent of the New South Wales government's revenue.
Under our constitutional arrangements royalties are the responsibility of the states and territories. That did not stop the government making a deal with the big three companies to credit all state and territory royalties when calculating their exposure to the MRRT, apparently completely oblivious to the flow-on consequences of that decision to the federal budget. In the absence of a negotiated agreement with the states, any time the states decide to raise their royalties, as Western Australia did and as Queensland and New South Wales reserve the right to do, the Commonwealth will be forced to cover the shortfall.
At the time the government signed the deal with the big three, Treasury assessed that the MRRT would raise around $38.5 billion. That figure will be raised almost entirely from projects in my home state of Queensland, Western Australia and New South Wales. I know my colleagues from Western Australia will have more to say on this. If we are being honest, Western Australia is the one that is going to be left carrying the can. Something like 65 per cent of revenue from the tax will come from one state. That is an extraordinary figure. Since when has a supposedly national tax ever raised 65 per cent of its revenue out of one single economy? It seems fair to say that the mining tax as proposed by the government is more complicated, less efficient and less fair than the arrangements currently in place.
It is the view of the coalition that the MRRT and the expanded PRRT are broken beyond repair. Any attempt to fix the defects in these taxes would likely result in a series of compromising concessions to the affected companies. That is no way to implement tax reform. Reform is always an ongoing process, but it should be delivered through an open, transparent and inclusive process, not through backroom deals with a few privileged companies who were given the opportunity of hammering out the deal to their own advantage. Indeed, any so-called reform borne out of such a process would lack the legitimacy required to make it worthy of the name.
We know now that the mining tax is unfair and inefficient but—guess what?—it might even be unconstitutional as well. There are a series of questions that cannot be answered as to whether the MRRT, which is a tax on resources at the point of extraction, is in fact a tax on state property and therefore prohibited by the Constitution. A number of mining companies and even the state government of Western Australia have flagged possible legal action if this legislation gets through the parliament. I would like to think the government had done their research and made sure that they were on solid legal footing before introducing these bills, but it seems that it was just too much to expect. We only need to look at the debacle of the PRRT and the ruling of one tax, one customer. Exxon Mobil has 50 per cent shares with BHP and that one ruling has been in dispute in the courts since 1990.
You might have thought that the government had learned their lesson after the debacle surrounding the Malaysian solution, but it seems not. In fact, thanks to Ken Henry, we now know that they did not seek any legal advice on the constitutional validity of this tax. Could things be more absurd? Here we are debating a bill which stands a half-decent chance of being the second highest profile government policy to be declared unconstitutional in the High Court. What an embarrassment!