Senate Committees Report on Carbon Tax and Mining Tax Repeals Just the Opening Shots

Thursday 5 December 2013 @ 11.40 a.m. | Legal Research | Taxation | Trade & Commerce

In recent days two important Senate Committees have reported on two key packages of  proposed legislation which the federal government claims are essential to its legislative agenda. On 2 December 2013 the committees reviewing the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 and related Bills and the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 reported recommending that both sets of Bills be passed.

Clean Energy Legislation (Carbon Tax Repeal) Bills

In this respect, the Committee reported on the repeal package of 11 Bills finding that the carbon tax had "a significant impact on costs for Australian businesses" and agreed with evidence that removing the tax would allow businesses to compete more effectively in international markets. The committee also came out in support of the governments proposed "Direct Action Plan" which is to replace the tax urging the government should "ensure there is policy continuity in Australia to meet its 5 percent carbon emission reduction target by 2020".

No surprise that the government initiated committee has supported the repeal, of more interest is the dissenting reports from the Australian Labour Party (the ALP) and the Australian Greens (the Greens) members of the committee which recommended that the Bills not be passed. The ALP report took the position that: "it is irresponsible to pass the package of Bills without a credible alternative emissions reduction policy", standing by the view that an emissions trading scheme (ETS) is the most rational policy choice for Australia.

Also the committee report adds comments from independent Senator Nick Xenophon who although supporting the majority view that the Bills should pass, points out that the abolition of the carbon tax "may not lead directly to a cost reduction" in electricity supply as claimed by the government. The Senator also added that his support for abolition of the tax was conditioned by the retention of the Clean Energy Finance Corporation which he said ". . . was not a private bank but an agency with specific knowledge and expertise to support renewable energy projects".

The 11 Bills making up the repeal package are:

  • Clean Energy Legislation (Carbon Tax Repeal) Bill 2013
  • True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013
  • True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013
  • Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013
  • Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013
  • Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013
  • Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013
  • Ozone Protection And Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill 2013
  • Clean Energy (Income Tax Rates and Other Amendments) Bill 2013
  • Climate Change Authority (Abolition) Bill 2013, and
  • Clean Energy Finance Corporation (Abolition) Bill 2013.

Reaction to Carbon Tax Report

Today's press reports that the Senate inquiry into the Coalition Government's carbon tax repeal legislation has "cast further doubt on the Bills being passed before Christmas" reporting that the "battle [is] set to stretch well into next year".

"The Senate committee's report, which recommends the tax be abolished and was tabled late tonight, shows Labor and the Greens have no intention of stepping away from their firm opposition to the Coalition's bid to scrap the carbon tax".

Minerals Resource Rent Tax Repeal and Other Measures Bill

In this respect the Senate Economics Legislation Committee recognised that revenue projections for the Minerals Resource Rent Tax (the MRRT) had been revised downwards and referring to previous reports finding that the reason for the shortfall in MRRT revenue was the specific design features of the MRRT.

On the questions of low income earners superannuation incentives and tax issues affecting small business the committee recommended that the government revisit certain measures in the Bill, particularly the low income earners superannuation incentives and tax issues affecting small business "once the Budget returned to a strong surplus" adding that the government should also consider the issue of low income earners superannuation incentives as part of its tax review.

“The committee recommends that the government revisit certain measures in the bill, in particular incentives in superannuation for low-income earners and taxation issues affecting small business, once the budget returns to strong surplus . . .”

Concerns that the repeal of the low income superannuation contribution legislation might be challenged as being "retrospective repeal" were acknowledged but the senate committee agreed with the Treasury view that the repeal was not “retrospective”. Instead the committee felt that taxpayers eligible for the contribution could not be said to have been unfairly penalised as a result of the changes that would only apply from 1 July 2013.

ALP members of the senate committee issued a dissenting report opposed to the repeal of measures that directly benefited low income earners and small businesses and recommended that the Bill not be passed. Stating also that "the MRRT was not put in place for the next six months but for the next generation" and was like the petroleum resource rent tax a tax which barely received any revenue in its first few years of operation.

Reaction to MRRT Report

Like the carbon tax repeal measures it is not expected that the MRRT legislation and the low income superannuation contribution aspects of it will be readily abandoned by the opposition in the senate and again another tussle, likely to continue past Christmas, is looming before this legislation passes into law.

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