The Australian Greens will use their power in the Senate to push for reform of the Petroleum Resource Rent Tax, putting the case that a gas tax that “actually works” could raise $94.5 billion in the coming decade.
The PRRT, first introduced under the Hawke Labor government in the late 1980s and designed mainly to tax oil extraction, has become notorious for being remarkably ineffective at raising revenue from offshore gas projects in Australian waters.
In the 2021-22 financial year, the PRRT generated a record low $900 million and continues to deliver only a 3-4 percent royalty on offshore oil and gas for Australia — despite $11 billion spent in fossil fuel subsidies.
This is because gas companies are allowed to carry forward the expenses they spend on exploration and development before they start making money from extraction and deduct these from future tax liabilities.
Credits carried forward under the PRRT have been allowed to “uplift” by between 5% and 15% above the long-term bond rate, allowing them to balloon out to hundreds of billions of dollar figures equivalent to the GDP of a medium-sized country.
As the Greens point out, this means that most gas companies developing projects in Commonwealth waters – inlcuding Shell, whose Gorgon project is the largest resource project in Australia’s hustory – will never pay any PRRT tax at all under the current laws.
The Greens reforms, first proposed prior to the 2022 federal election, would wipe out all of the
gas industry’s carried-forward tax credits, requiring them to start paying tax from the enactment of the legislation.
Companies would still be able to deduct expenditure using ordinary company depreciation schedules, but they would no longer benefit from historic or future uplift factors.
Further, the Greens would apply a 10% royalty to all offshore projects that are subject to the
PRRT. This royalty, deductible against the PRRT, would ensure a baseline level of annual revenue.
“Australia’s gas tax is broken,” said Greens leader Adam Bandt. “When a nurse pays more tax than a global gas giant, something is seriously wrong.
“This is the best chance we’ll have in a generation to make these corporations actually pay the
gas tax.”
The call for tax reform targeting gas companies comes as fossil fuel giants rake in eye-watering superprofits on the back of surging energy prices driven up by Russia’s invasion of Ukraine.
It also comes as debate intensifies over the role of gas in Australia’s future, with a growing push to wean households from the fossil fuel and switch them to increasingly renewable powered electric appliances.
