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 its 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 five 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.
This article was first published by Crikey.
Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.
