Heath Aston | Sydney Morning Herald | 11 October 2016
Just five per cent of oil and gas projects operating in Australia are paying anything towards the Federal Government’s royalty-like scheme designed to share the wealth generated by the nation’s resources with the public that owns them.
As pressure builds for a parliamentary inquiry into the petroleum resource rent tax, Fairfax Media can reveal that just eight out of 149 resource projects currently generating revenue contributed a cent in PRRT in 2014-15.
The Australian Tax Office is concerned that the petroleum resource rent tax will not deliver anything over time.
The as-yet-unpublished figures from the Australian Tax Office will add to concerns by some academics and tax transparency campaigners that Australians are being short-changed by the boom in liquified natural gas exports.
On Monday, the Greens backed a parliamentary inquiry into what Senator Larissa Waters called a “fossil-fuelled rort” while Treasurer Scott Morrison hinted at some concern within government.
“The Treasurer will continue to take advice on sensitive tax matters such as this,” said a spokesman.
ATO data shows the oil and gas industry, which is now dominated by multinational-operated LNG projects off the Western Australian coast and Queensland’s coal seam gas sector, had revenues of $25 billion last year.
But the design of the PRRT, which is a rent based on super-profits rather than a flat royalty, allows companies to write off exploration and other capital costs against revenue before being forced to pay any PRRT.
The ATO figures shows the total “carry-forward expenditure” of the industry has risen to $187 billion. Effectively, that means the sector can pocket sales of $187 billion before being forced to pay any PRRT.
Resource tax experts like Diane Kraal, a senior lecturer at Monash University, say the picture is worse because generous “uplift rates” like the 18 per cent rate applied to exploration costs mean carry-forward expenditure grows by that percentage every year that they are not used against revenue.
According to the ATO, total carry-forward expenditure grew sharply from $128 billion in 2012-13.
Ms Kraal has warned that the PRRT will not deliver any significant revenue “in her lifetime” if its design is not overhauled.
On Monday, Fairfax Media revealed that Qatar, which will lose its crown as the world’s biggest LNG exporter to Australia in 2020, will receive $26.6 billion from its LNG sector in that year.
Treasury forecasts Australia to receive less than $1 billion in PRRT in 2020.
Oil and gas peak body, the Australian Petroleum Production & Exploration Association, defended the industry on Tuesday, saying “PRRT was never intended to be paid by all projects at all times”.
“It is a super-profits tax so it only applies when projects achieve super-profits,” said APPEA chief executive Dr Malcolm Roberts.
“The PRRT is just one of many taxes paid by the industry. The combination of company tax, state and federal royalties and the PRRT adds up to more than 50 cents in every dollar of profit.
“Taking all these taxes into account, the oil and gas industry pays the highest effective tax rate of any industry in Australia.”
In October last year, Chevron, the US-owned company that owns Gorgon, the world’s largest LNG plant, which is located in Commonwealth waters off WA, was hit with a $300 million bill by the Federal Court for tax avoidance.
When it sought approval for Gorgon and sister project Wheatstone, Chevron promised it would contribute “$338 billion to Federal Government revenue” by 2040.
Asked whether this was guaranteed, Mr Roberts said: “The revenue to government from any project will depend on market conditions over the life of the project – when commodity prices rebound, government revenues will benefit.”