ABC Radio National Breakfast with Fran Kelly 

KELLY:

Well the Prime Minister was at a Labor Party dinner last night so he didn't address the miners but earlier in the day his Resources Minister Martin Ferguson did and he was striking a more conciliatory tone when he addressed them.

He said the Rudd Government wants to work with the industry and he's promising some generous compromises. Martin Ferguson joins you in our Parliament House studio, Minister good morning.

FERGUSON:

Good morning Fran.

KELLY:

Minister in your talks with the mining sector, have executives ever conceded that they should pay more tax?

FERGUSON:

Absolutely.

KELLY:

What have they said?

FERGUSON:

A number of major mining company CEOs have said to me, not just over the last couple of weeks, they all knew a tax reform package was coming, that they've had a good decade and they're in a position to actually pay more tax.

KELLY:

I think a lot of people listening will be confused to hear you say that because it certainly sounds like a debate over paying more tax.

FERGUSON:

Oh I think Tony Abbott would have been a good representative at the last ACTU congress when Julia Gillard stared down the union movement but we'll stare down the rhetoric and the debate about taxation reform in Australia.

We'll come to a landing point following full and proper consultation which means the Australian community gets a fair share for the development of their resources and we’ll put in place a tax regime that is balanced and attractive to investment.

KELLY:

Okay before we get to that, the consultation process, just to stay with this thing of executives conceding they should pay more tax. Who? At what level? Can you name names?

FERGUSON:

Come on, I'm not going to go through the nature of private discussions I have with companies. I'm not Twiggy Forrest who claims …

KELLY:

Well we're hearing them all now one after … go on.

FERGUSON:

I'm not Twiggy Forrest who claims he has a private discussion then reveals it. Look, I have the confidence of this industry in terms of their capacity to come into my office and talk about a range of issues, including investment horizons, what they're going to do this year or the year after, their potential commercial negotiations, companies beyond Australia.

I can assure you and those companies know the nature of their discussions with me that a number of companies -some of the bigger companies- have conceded to me that there is room to pay more tax. This is not a debate about whether or not they should pay more tax. It is not a debate about whether there should be a profit-based minerals tax system in Australia. It is the nature of the system.

KELLY:

Is it then a debate about the process and have you mishandled it? Because your own hand-picked adviser from the business community, Rod Eddington, said to the Mining Council dinner last night that this process has been flawed and the Government should start again.

FERGUSON:

Oh tax reform's always been difficult in Australia. You know that. Go back to the PRRT and I heard you earlier refer to the huge boom in investment in the gas industry in Western Australia, we will get the same boom on the East Coast of Australia because of a debate we had 25 years ago about the Petroleum Resource Rent Tax.

I can recall the debate about the fringe benefits tax, the restaurant industry was going to fall apart in Australia. We have put out there for appropriate public discussion, our view about what should form the basis of a petroleum and minerals tax in Australia going to a profits-based system.

But we have clearly said that we are open to generous transitional arrangements. That's where we are focused, we received our first report from the Tax Consultation Committee last Friday. That has been received - that is being considered by Government and I can assure you that even this week, despite all the public sabre-rattling, there are detailed discussions underway with a number of key companies across the broad spectrum of the petroleum resources sector.

KELLY:

You wouldn't know that to hear the miners. Again, Leigh Clifford, now admittedly he's not a miner now but he was a former chief of Rio addressing that conference last night, saying the tax is ill-considered and poorly implemented even though he agrees there's room for a profits-based tax. So …

FERGUSON:

Between you and I, no one's going to negotiate through the media. If you want a solution, then you sit down, go through the detail and work out what is an appropriate landing point.

The role of the mining companies at this stage is to better inform Government processes because the Tax Consultation Committee will not be making the decisions, the Government will be making the decisions and senior ministers are involved in discussion with individual companies in considering the outcome of the consultation process.

KELLY:

All right, meanwhile the public is trying to figure out what is going on here, so you have to give us something. You've talked about generous transitional arrangements. What does that mean? What sort of change would that mean to what we've all read in the document of what this tax - how this tax will be designed?

FERGUSON:

Well it's about working out what is appropriate across the industry. You can also say we've got to be very careful because we've got individual companies lobbying for outcomes that suit their investment book but which could be detrimental to some of their competitors. So we've got to make sure we are very balanced and detached from the needs of particular companies to make sure that at the end of the day we have a tax system based on profits that also is attractive to all in the industry from an investment point of view because as is always the case in business, if one company through this process can dud another company then that's where they're going to head with respect to their advice to our government.

KELLY:

All we're hearing though from the miners, and therefore from the Opposition too, is that the Government isn't really negotiating, there's nothing much on the table to change. The big - the big headline issue is the rate of the tax itself, 40 per cent. Do you stand by the comments from the Treasurer and the Prime Minister in recent days that that is non-negotiable?

FERGUSON:

Well the rate's not been a problem to Australia. You referred this morning to our huge investment pipeline in Western Australia in the LNG industry. It's 40 per cent. The transitional arrangements go to the other aspects of a profits based system that you will put in place in Australia. This is …

KELLY:

[Interrupts] Okay what other aspects? The rate at which it cuts in?

FERGUSON:

Come on Fran, you know I'm not going to start detailing through the ABC early on a Thursday morning, at the end of the parliamentary week, the type of issues that we are considering. That is completely inappropriate. We will not negotiate through the media. The companies know the type of issues that they want us to consider and so do we.

KELLY:

Why is it …

FERGUSON:

We will stick to our guns in terms of working out what is appropriate and that at some point in the future, we will clearly detail the outcome of those consultations.

KELLY:

Well I wonder at what point in the future because Tony Abbott has already said this will be the centrepiece of the election campaign, so the public needs to understand really what is being talked about. Do you agree that the next election will be a de facto referendum on this tax?

FERGUSON:

Oh well from Tony Abbott's point of view of course it is, it's good for fundraising but we're going to stick to our guns. Tax reform is not easy. We have a view this is not just about a profits-based system for the minerals and petroleum industry, this is also about how we go about broadening and strengthening the Australian economy.

Take the tourism sector of my portfolio, a cut in company taxation is exceptionally important to them, they are under the pump in terms of competing with the minerals and petroleum industry at the moment for skilled labour. You go up to Gorgon, where you're talking about a base rate for a trade's assistant, a non-trades person of $150,000 per year. How can a tourist operator compete with that? You know, we give them concessions to actually enable them to purchase new equipment. Think about superannuation.

This is a debate about more than just where we end up in a taxation system in the mining and resources sector, this is about the strength of the Australian economy as we go forward.

KELLY:

Is it really though perhaps more a negotiation about the amount of dollars being handed over behind those closed doors? When it all comes down to it the Government wants to raise an extra $9 billion in profits tax, that's an extra $9 billion, the industry doesn't want to pay more tax in total. Is that what it comes down to?

FERGUSON:

No I put to you that the better companies in this industry accept they've got to pull their weight. They have had a good decade. Just think about the discussions again in the media today about yet another huge hike in iron ore prices. Look at what's happened with respect to a range of our commodities.

Go to Western Australia. The Western Australian Government is just about to rip out of two iron ore companies, increases in royalties over the forward estimates, the next four years, of $3.2 billion. Are the companies squealing? No. Because they're involved in an endeavour to put in place a joint venture which means huge synergies, further export opportunities and efficiencies and further profits. They appreciate that we're entitled to put in place a profits-based tax system. That's what they wanted.

The fight is about the detail of the system. I have a view there is an appropriate landing point that we will clearly articulate what we think is appropriate with respect to where we go forward but I know we won't please everyone because there are some in industry who just are unwilling to engage, and that's why I say some companies are absolutely engaged and want to resolve these issues despite the public rhetoric, others we will never please.

KELLY:

Will we hit that landing point before the election because otherwise the election will be on this issue?

FERGUSON:

Well we'll just see how negotiations go along, but from Tony Abbott's point of view, good on rhetoric, no substance, a policy-free zone yet again. We'll stick to our guns just like we stuck to our guns during the global financial crisis. He said we were wrong yesterday. Have a look at the national accounts. Where would we have been today without our intervention in terms of stimulating the economy and keeping people at work over the last 12 to 15 months.

Tony Abbott said we were wrong then, he's now saying we're wrong in terms of broadening the base of the Australian economy, trying to make sure the Australian community gets a fair return for the resources that they own 100 per cent. Well we're going to stick by the national interest argument.

Tony Abbott can run off and chase all the donations in the world, in the end the Australian community will respect hard decisions and leadership.

KELLY:

Martin Ferguson, thanks very much for joining us.

FERGUSON:

Thank you.