Oil and gas tax may raise no extra revenue for decades

Australia is in the midst of an enormous gas export boom, yet a tax meant to share the profits with the community is failing to raise any new revenue.

As the vast reserves in the nation's north-west and Queensland are exploited, Australia is poised to become the world's biggest gas exporter, expected to soon overtake the Gulf nation of Qatar.

But it will be a long time before this delivers a tax bonanza.

"Despite the fact that Australia's on the verge of becoming the world's largest exporter of LNG, there'll be no new revenues from the primary tax on oil and gas for the next two decades and perhaps even longer," said Jason Ward.

Mr Ward has been researching the issue for the Tax Justice Network - a coalition involving churches, welfare groups, unions and other civil society organisations.

The researcher has found a comparison that is enough to drive him to drink.

"In 2018 we know that Australians will be paying three times more tax on beer, and that's excluding GST, than the oil and gas industry will pay on the primary tax on all oil and gas production," he added.

The tax in question is the Petroleum Resources Rent Tax or PRRT. Despite the massive production boom, the tax take has flatlined.


'Problem is the oil price has more than halved'

Malcolm Roberts, who heads the petroleum production and exploration association, said the market is to blame.

"The problem we have at the moment is that the international oil price - and gas is effectively pegged to that - has crashed, more than halved," he explained.

"This has really upset the project dynamics, it's really upset the profitability of these projects, so it's not surprising that less profitable projects are paying less tax."

But critics, such as Dr Mark Zirnsak who is the director of justice for the Uniting Church's Victorian and Tasmanian synod and convenor of the Tax Justice Network, say the deductions companies can claim against the tax are so broad, the community is being denied sufficient return.

"This is a non-renewable resource - once it's gone, we can't sell it again, it's a one shot," he argued. "We need to make sure we're getting the benefit for the community."


Parliamentary inquiry needed to find 'loopholes'

Dr Zirnsak is demanding a parliamentary inquiry to investigate why the tax is raising so little revenue.

"We want the Parliament to identify where the loopholes are and to identify what changes to the law need to be made to fix the loopholes," he added.

One of the concerns is a so-called "uplift" rate that allows companies to deduct all their exploration costs, and then some

"The oil and gas companies are entitled to 18 per cent uplift," Jason Ward explained.

"So if they spend $100 million in year two, they have $118 million in tax credits and then that compounds annually."

Another concern is that companies with an aggressive record of tax minimisation self-assess their tax liability.


No PRRT for 20 or 30 years: WA Treasury

Documents obtained under Freedom of Information from the Western Australian Treasury suggest that giant new gas projects on the north-west shelf may pay no petroleum resources rent tax for 20 to 30 years.

Malcolm Roberts questioned this.

"I don't think anyone can make such a hard and fast prediction about what revenue might be raised by the PRRT over 20 years," he said.

"I'm not confident that anyone can predict what the oil price is going to be next week, let alone over the course of 20 years. But I also think there's a misunderstanding here - the PRRT is a super profits tax, a super profits tax is only paid when you're making super profits."

However, Mark Zirnsak said the community needs to have a discussion about how much potential revenue it is forgoing.

"Into the future, we could be losing hundreds of billions of dollars on the gas boom," he warned.

"This is important, because we want a decent society where we can fund our schools, our hospitals, our universities, we need this revenue for the benefit of the community."


Resolution put to the Maritime Union of Australia National Council

Monday 10 October 2016

The MUA National Council:  

   NOTES that Australia is expected to be the world’s top producer of LNG by 2021

   CONDEMNS the practices of aggressive tax avoidance that the Australian Senate Inquiry into Corporate Tax Avoidance found are used by oil and gas companies operating in Australia  

   NOTES that the oil and gas industry has accumulated over $188 billion in tax credits that can be used to pay down their Petroleum Resource Rent Tax (PRRT) obligations

   SUPPORTS the closure of tax loopholes in the PRRT to raise revenue for social security payments, schools, hospitals and other essential public services 

   CALLS for an urgent Parliamentary Inquiry into the Petroleum Resource Rent Tax to ensure that the oil and gas industry pay its fair share and to increase the transparency and accountability in the industry so that Australians can trust the integrity of the tax system.