The extraordinary dodging of both company tax and the Petroleum Resource Rent Tax (PRRT) by Australia’s, and the world’s, biggest gas companies — and thus the theft from Australians of income from our own natural assets — should be front and centre in the election campaign, given the colossal deficits and debt Australia currently faces.
As Crikey reported last year, the PRRT is a colossal rort — taxpayers are actually receiving less now than they were 20 years ago despite the massive expansion in gas exports from Western Australian projects and the tens of billions in extra revenue offshore gas companies are enjoying. Only Russia’s invasion of Ukraine — and the massive spike in energy prices it caused — finally bumped PRRT revenue up in the forecasts in the April budget. But those forecasts remain below the levels of 20 years ago.
New data compiled by the Greens as part of their proposal for a new super-profits tax on the sector reveals the shocking extent to which the rules of the PRRT, which allowed accumulated deductions from exploration and construction to artificially grow by the long-term bond rate (LTBR) plus up to 15 percentage points, have inflated deductions.
The government changed the rules marginally in 2019 to reflect that offshore gas projects take much longer to come online, and thus generate much bigger accumulated deductions, so that deductions would only grow by the LTBR plus 5 points for a decade, at which point they’d only grow by the LTBR.
But the damage was already done to taxpayers — and is now embedded in the PRRT system. The Greens have found in Australian Tax Office data that the current amount of deductions available to gas companies is $282 billion — or around 13% of GDP.
Every single dollar of those deductions means a dollar less in PRRT payable. That’s why we now get less in PRRT revenue than we were getting in 2000.
And that’s why, according to the Tax Office, gas companies won’t be paying any PRRT until the mid-2030s — even as they reap astonishing export returns worth over $100 billion a year. In fact, Shell has announced that it intends to never pay any PRRT on its profits from the Gorgon or Prelude fields. The biggest contributors to PRRT returns are oil companies: BHP and Esso’s Bass Strait projects.
It means that foreign companies are making huge profits from Australian resources, without paying Australians anything for their use.
And these companies also pay little or no company tax — again because of their expert use of deductions.
Like US-owned ExxonMobil, owner of 25% of the Gorgon project. $15.5 billion in revenue in 2019-20. Taxable income: zero. Company tax: zero. PRRT paid: zero.
Or US-owned Chevron, owner of 47% of Gorgon, 64% of Wheatstone and 16.7% of the North-West Shelf. $15 billion in revenue. Taxable income: $169 million. Company tax: zero. PRRT: zero.
Or British-owned Shell, owner of stakes in NW Shelf, Gorgon and Prelude: $5.3 billion in revenue; zero taxable income, zero company tax, zero PRRT.
Woodside, at least, pays some tax: $11.1 billion in revenue, $3.1 billion in taxable income, $454 million in tax, no PRRT.
According to data sourced by the Greens, 28 gas companies collectively earning $77 billion in revenue and $482 million in taxable income paid no tax in 2019-20.
Remember these numbers are all wildly out of date: the revenue of these companies has more than doubled in the past six months, with little change in their costs, but because of those hundreds of billions in artificially inflated deductions, they won’t pay any more PRRT and little in the way of extra company tax.
The Greens want to dump the failed PRRT with a new system that would wipe out the accumulated deductions in one year, leaving none to be carried forward. There would be no uplift for any further expenditure, which would be deducted over 15 years. They also want a deductible 10% royalty applied to offshore gas projects other than the NW Shelf.
The Parliamentary Budget Office says the Greens proposal would generate $90 billion in additional tax revenue in the next decade — revenue that is currently flowing, mostly, to foreign shareholders for Australian assets.
The fact that the Greens are the ones bringing this idea forward says a lot about the extent of state capture of Australia by fossil fuel companies. At a time of massive budget deficits and a likely trillion-dollar debt, neither major party is interested in preventing the loss of revenue that belongs to Australians to foreign shareholders. It’s left to the Greens to do the hard policy work that would make life uncomfortable for fossil fuel giants.
It’s another example of how we’re a carbon state — except, unlike other carbon states like the fossil fuel sheikhdoms of the Middle East, we don’t even know how to profit from it.
Finally, this SHOULD be an election winner. I worked all over the world in the O&G industry, including Norway. The profits are truly astounding. From Day 1 of their oil discoveries in the late 1960’s, Norway has imposed a tax of 70% of profits, with minimal overseas tax losses and other evasion methods allowed. This royalty regime was put in place by an Iraqi. He became No3 in the Norwegian Oil Directorate after “accidently” investigating their fledgling industry during a medical trip to Norway. He observed first hand the rape of Iraq’s oil resources courtesy of BP and others. His clear warning to Norway was heeded, by a Government obviously looking out for the interests of its population
What a NOVEL IDEA, Scotty….!!
Norway has now an enormous Soverign Wealth fund of trillions, which is quarantined from political interference. Tax cuts were never considered. The UK earned similar income from the North Sea, and JUST LIKE AUSTRALIA, squandered it on tax cuts with nothing now to show for it. I worked on Gorgon LNG in WA. To describe the design and construction contracts as a racket is inadequate. In my mind, this loss of public finds is a generational scandal. Both major parties receive too much by way of kickbacks from the O&G companies to change things. They are too busy feathering their own future, like Martin Ferguson and the LNP.
The Norwegians understand well the potential for adverse outcomes by their moral standards, and limit the influence of foreign O&G multinationals, fast food joints, US advertising companies, and more, They understand the flow-on health, and population psychological conditioning these operations bring along with their brand.
The main diference is a 50% female parliament, more than a little intelligence in the MP ranks, and a deep desire for the good of the population. Comparison with Australian parliamentary behaviour would bring one to tears..short termers of minimal intelligence, lacking vision, and mostly self-obsessed spivs in the driving seat.
I suspect the real main difference is that Australia was built on theft. Corruption is inherent in Australia. The pollies and the corporate bosses have nothing but contempt for this country and its people and see us as just a bunch of suckers with a lot of resources to plunder
I wonder which one/s
of them has secured a good kickback from turning a blind eye to the Chinese Solomon Island deal?
What difference would turning a blind eye make? If the Solomon Islands wants to make a deal with China, there’s not much the Australian government can do. China’s our biggest trading partner anyway, what’s the difference?
Missile strike distance?
No, much more boots-on-the-coral-strand level.
ICBMs are meant to long distance – it’s in the name.
@Epimendes
Possibly, however, establishing a significant “Boots on the ground” type of base in the Solomons has logistical difficulties.
These are likely to lead to significant unrest amongst the disadvantaged outer islanders, which was the same situation the PM of the Solomon Islands faced, not so long ago, when they ceased recognizing Taiwan.
I take it that we will not be stepping up to control the next attempt to overthrow the current, China focused elected government?
It is a pity that the Singaporean Government allows such an opaque banking system.
The banks in Singapore make the Swiss banks look downright transparent and forthcoming.
How many of these LNP “robber baron” politicians have bank accounts in Singapore or the British Virgin Islands or the Cayman’s?
Most of us will never know.
One of the more bizarre aspects of the UK’s North Sea oil bonanza, apart from tax cuts, was the almost direct transfer to the vast dole bill for 3-4M for most of the 80s whilst abolishing industry in favour of the BigBang to make London the world’s premier money laundry.
Result, a well watered wall and entire regions of rusting infrastructure devastated for generations.
I’ve mentioned this previously – should still be available on YouTube: The Spiders Web-Britain’s Second Empire.
A doco on tax evasion in Britain. Maybe done 3 or 4 years ago? Excellent background knowledge to what is happening with big money.
I will never understand why men want a world where one man can decide they are all to go to war at the stroke of a pen. I do not understand why men want to go and die to ensure a few percent of the men on the planet can keep their wealth and power all to themselves. These same men do what Trumps father did and ensure their sons never die on the battlefield. Men seem to do so many silly things because they are so caught up in the ego games against each other, which makes so many of them unhappy. Amazon alone is financing the China mega armed forces by being the platform for 63 percent of Chinese Companies, who do not hesitate to post many fake reviews or sell you plastic that will break within a couple of months and pollute our world . Not only that money goes to China but then Amazon makes so much of its own product in China so they get that massive lump of money while more and more Americans fall into poverty. I do not understand our governments going over and playing nice with the Chinese on one hand and then putting the fear of God into us all over what it is doing and saying every day over possible war. China was nothing before the USA handed over all its knowledge and advantages to it. We also educate the next generation of Chinese instead of ensuring our own next generation are skilled enough to fight a war and we have the manufacturing to ensure we can support our nation when China decides to stop dealing with us completely. Has no one noticed they have already fired a shot over the bow of the ship ??
This is just another mess that the LNP has got Australia into.
Qatar gets 25 billion plus for what Australia may be lucky to get 1 billion for in regards tho the gas. Also Qatar still owns all the right to the oil
Finland is the wealthiest nation on the planet per head of population because they charge a tax of 80% or thereabouts on the oil and gas industry and still the same petroleum companies that are in Australia go there. Just shows how much these companies are robbing Australia!
If my memory is O.K. I think Martin Ferguson, ex ACTU, ex Labor federal minister in this area has something to do with tax failure, now employed by them, I’m open for correction. I support Labor so this comment is not biased
There’s a gotcha question to be put to Scumbo: What’s the current amount of dedcations available to gas companies under the PRRT?
Make it simple. How does Qatar get ten times more money from selling less gas?
So the LNP’s policy is to become a climate change pariah and give the ‘asset’ that makes us that pariah free. A zenith of the corruption Capitalism has devised.
Zenith or nadir, it is grossly culpable incompetence, to be generous, and plain corruption to be accurate.
And watch as the pusillanimous populace prepare to perpetuate their own pauperisation for another three years.
Brilliant observation and description Prof and spot on.