Contributed by Jim Hayes
In one of a suite of new submissions to a Senate inquiry, Oxford Institute for Energy Studies academic Juan Carlos Boué warned that unless Australia “radically overhauled its fiscal regime,” it would mean the second lowest share of government revenue from oil and gas in the world.
Most Australian gas is exported, and by 2020, Australia expected to become the world’s number one exporter. At present only Qatar exports more.
But as little as $600 million is expected to paid back to Australia this year. In contrast, Qatar, which will export slightly more than Australia will get $26.6 billion. This is a huge difference, and there is no way to justify it.
The 30-year-old petroleum resource rent, provides oil and gas companies with generous concessions, allowing them to offset the cost of exploration and claim tax credits on decommissioning plants in the future. Only 5 percent pay any resource tax at all. Taxpayers are therefore subsidising a generous portion of their operating costs.
In addition, energy prices have climbed by six times the average pay rise on Australia’s east coast. Oil and gas companies are taking a slice of this bounty. Oil prices have surged since 2000, because the Australian government tied domestic prices to international prices, while continuing to allow tax avoidance.
Carlos Boué singled out Australia and the United Kingdom for having an alarming downward trend in petroleum and gas revenues.
Using loopholes in the system, these companies have been part of the practice of transferring revenues to tax free havens.
The Senate inquiry will hear about allegations that US multinational Exxon Mobil, which controls 19 percent of east coast LNG gas, deliberately misled the Senate by not revealing its Dutch parent company had based some of its operations in the tax havens of the Bahamas.
Tax Justice Network spokesman Jason Ward said the company earned $7.2 billion in revenue in 2016 but only a recorded an operating profit after tax of $38 million after paying interest and finance charges to related parties in unknown locations.
“Exxon, and other multinationals, particularly in the resources sector, must be required to be dramatically increase transparency and disclosure of their operations,” Mr Ward said.
The Tax Justice Network and others, including the McKell Institute, economist Ross Garnaut and former Treasury secretary Ken Henry, have been calling for a new royalty that will compel the companies to pay 10 percent on all exports.
But 10 percent should not be anywhere near the ceiling of what is paid back to Australia. The loopholes that allow big companies large scale tax avoidance must be closed, and petroleum resource rent tax with its generous credits, should be re-examined. They should be paying at least the nominal company tax rate, which currently sits at 30 percent.