SUBJECTS: Tax reforms
KIERAN GILBERT:
Chris Bowen, I want to get your response to a few of those points from Barnaby Joyce but first and foremost, we've seen the resources stocks cop a battering today. Martin Ferguson says the miners are to blame for talking down their prospects. Do you agree with that?
CHRIS BOWEN:
Well, Kieran, share prices go up and down all the time in response to not only Government announcements but commentary as well, and that point is well made. But this is a change in the taxation of Australia's resource companies when they make very significant profits and there are many elements of the changes that we announced yesterday that the mining industry have actually been calling for: a rebate for small miners who are exploring and going into difficult ventures, that's something the mining industry's been calling for for as long as I can remember.
And these are arrangements which aren't new in Australia. We have a profit based tax in offshore exploration and exploitation already. That hasn't stopped investment. That hasn't stopped growth. It hasn't stopped things like the Gorgon, major investment in Australia. This will be seen, I think, in the long run, as being a very serious, well thought out reform which gives Australians a fair share of what are very, very significant profits in the mining sector.
GILBERT:
Okay, well, you say it's partly due to the commentary that stocks go up and down and sometimes due to commentary, but surely it's because it's a great large new tax on this sector. That's why the analysts are telling people to sell.
BOWEN:
Well, it's also giving Australians a fair share of what is, at the end of the day, theirs. It's their minerals in the ground. It belongs to all of us and so it's appropriate that we change the taxation arrangements. It's also appropriate that we have a more efficient tax system when it comes to mining; one that actually encourages exploration, one that isn't based on volume, which is what the royalties currently are. So, at the moment, the situation is, when mining companies are in difficult times, when the world commodity markets are in downturn, we tax them exactly the same. So we have mines which would otherwise be viable going out of business in down times because the tax rate is flat. Well, we wouldn't do that. What we would do is not tax when times are rough, when the super profits aren't being achieved, but we would have a fair tax when we are seeing massive windfalls, not only to mining companies but to their owners and across the board, and we think –
GILBERT:
Well, if you think that it's fairer, why wasn't the Government, the Prime Minister and Treasurer, upfront in terms of the numbers? Because what you've said is the profits have soared $80 billion but taxation has only increased $9 billion across the same period of the last 10 years, but you've failed to mention the company tax which had been paid by those same companies over that decade, and I'm told it runs into the tens of billions of dollars.
BOWEN:
Well, the fact of the matter is this, Kieran: whichever way you slice it and dice it, before the mining boom Australians shared one dollar in three, and these days as a result of the flat tax, it's one dollar in seven out of mining profits. And we think there can be a fairer deal. We think it can be done more efficiently. We think mining can grow. The expert analysis that we've seen says that even with the super profits tax, when you combine that with a reduction in the corporate rate, that we'll see mining exploration and activity grow. And as I say, this –
GILBERT:
Why was there no mention of the company tax, though? During the last decade, Access Economics has done some calculations which suggest that $80 billion in tax, when the royalties and the company tax are combined, $80 billion's been repaid, not the $9 billion that you claimed yesterday.
BOWEN:
No, I don't accept that there's been no mention of company tax, Kieran. That's in all the documentation that's been –
GILBERT:
But in terms of the argument that the Prime Minister makes, that $9 billion parallel to $80 billion in higher profits.
BOWEN:
The argument that we're making is that we currently have a flat royalty tax which has no linkage to profits. That's the argument that we're making, that you have a flat tax, which means that in the bad times mining companies are paying too much, and in the good times, yes, they're not paying enough, not paying anywhere near enough. We don't run away from that and we've been upfront about the reasons to change it.
GILBERT:
But what about the company tax, which does seem to have kept pace?
BOWEN:
Well, of course –
GILBERT:
We're talking $80 billion over the last decade, that's a fair whack.
BOWEN:
Well, of course mining companies pay corporate tax and so does every other corporation in Australia. And when we introduce the super profits tax, that will be a deduction for corporate tax, which is not the case in some other countries with the super profits tax. It's not the case in Norway, which has a very successful industry with an effective tax rate of 78 per cent.
GILBERT:
Okay. Well, in terms of the reforms, though, 125 taxes we had on Friday of last week. Today I think it's 126 taxes. Where's the simplification that was meant to be in this response?
BOWEN:
Well, there's been very significant simplification when it comes to small business. It will be much better for small business in terms of a) cash flow and b) compliance to have a much simpler depreciation regime, not only in terms of the $5,000 upfront depreciation, which means that they won't have to depreciate it over years, but also in terms of combining all the different mechanisms of depreciation small business currently have to deal with, just to one simple process, with a 30 per cent depreciation rate. That's much better for small business.
We also recognise that there's more to do in terms of simplification of personal tax. We've been very up front about that yesterday, saying we're attracted to that and we're working on that and we'll have more to say about that, and we've been up front about that. So yes, there is simplification to do. We've done a lot of simplification and there's more to do.
GILBERT:
Okay. Chris Bowen, as always, appreciate your time today on PM Agenda. Thanks.
BOWEN:
Great pleasure, Kieran.