Australia already has a gas mileage tax, but without reform it will remain ‘a tax that no one pays’
The really bizarre thing about calls for a UK-style windfall tax on gas is that Australia has already got one.
Gas prices have soared to levels not imagined until 2015, when three resource giants spent $80bn building terminals in Queensland that had the potential to export three times that of Australia’s east coast gas .
At the time, the “netback” international gas price (net of liquefaction and shipping costs) was barely $10 per gigajoule, and was not expected to climb much.
Suddenly, in the span of a year, it has jumped to three times that level. Local industrial customers are now being asked to pay a barely reliable $382 per gigajoule – and gas suppliers were asking for $800 before the energy market operator stepped in and kept prices still “crippled” at $40 per gigajoule. limited.
gas generators not willing to provide electricity
Gas is so expensive that on Monday, when nearly a quarter of Australia’s coal-fired electricity-generating units were out of operation and it looked like New South Wales and Queensland would be plunged into darkness, gas generators turned on their own instead of electricity. UP was sitting on the hands.
He took action only after being ordered by the Energy Market Operator.
In Britain, where export gas prices have climbed as high (and one of those companies, Shell, is involved), the prime minister, Boris Johnson, imposed a 25% windfall tax on oil and gas producers.
The fund will help support households struggling with particularly high bills, and will be phased out when oil and gas prices return to normal.
Australia already has a special tax on gas
Here are examples to set aside an entire industry for an additional tax. Scott Morrison did it in 2017 with a special tax on the big banks, which continues to this day.
The Rudd and Gillard governments tried this with a short-term 40% super-profit tax on the mining industry, which was based on the long-term 40% resource rent applied to the oil and gas industry.
That’s right. Australian oil and gas producers are required to pay 40% of their profits as tax, in addition to a 30% tax on company profits spent over the years.
This is large enough to ensure that windfall gains from Russia’s invasion of Ukraine are well and truly taxed along the lines declared in the UK, allowing the Australian government to make the most of the windfall and higher energy prices. Allows it to be used to support families suffering from Or so you would think.
And yet the amount collected is very small: $2.4bn, which is not more than the amount collected in 2005. Sometimes, it goes as low as $1bn. In the words of Tony Wood of the Grattan Institute, himself a former energy executive, this is a “rather strange thing that no one pays for”.
Australia Institute’s analysis of Tax Office data shows that none of Queensland’s three big gas exporters have paid any income tax since the start of their projects in 2015, except for $5.3 billion in revenue by Santos. Excluding the $3 billion paid on
Designed for oil, used for gas
In 2016 Scott Morrison hired retired public servant Michael Callaghan to ask why the mineral resources tax is raising so little money.
Callaghan designed this well for oil, which was set up for the tax in 1988, but poorly designed for gas.
One of the two biggest problems was “regeneration”. Profits are taxed after deducting earlier losses. These losses are carried forward using a regeneration rate.
Sign up to receive an email every morning with top stories from Guardian Australia
For oil projects, the recovery rate on losses does not matter much as they start making profits very soon.
Gas projects are much more expensive and take many more years to pay off, making the regeneration rate significant.
Australia applies two leverage rates: the long-term bond rate plus 5% (for normal losses), and the long-term bond rate plus 15% (for exploration losses).
The rate of longer-term bonds and 15% can increase over time so much that Callaghan found that it allows exploration deductions.
Nearly doubling every four years, meaning that a moderate amount of exploration expenditure could develop into a large tax shield.
And firms hang on to the high-leverage cut, using the lower-leverage first.
The other major problem is that, while with oil it is easy to tell when oil has been mined and profits should be taxed, with integrated liquefied natural gas projects, it is difficult to tell when mining stops and liquefaction occurs. begins.
tax in the dark
Without a final final price for the gas before it is liquefied, three methods are used – two of them complex and one a private agreement with the tax office.
Callaghan found that if the simpler “netback” method is used, the tax will raise an additional $89bn between 2023 and 2050, including a “particularly strong” additional $68bn between 2027 and 2039 at prevailing prices. Will happen.
In his 2018 response, then-Treasurer Josh Frydenberg cut levy rates and asked the Treasury to review the method for calculating the transfer value. It had to report back “within 12 to 18 months”.
For all we know, Treasury reported back, probably two years ago in May 2020.
It’s a fair bet that our new government will be faster than the old one to actually raise a few billion more from the petroleum resource rental tax, especially given the amount available for the tax.
If the additional tax were used to provide relief from high energy prices, the government of Australia could not be criticized more than Johnson in Britain.
And if he only said he was looking to properly implement the tax we received, he might suddenly find Australia’s gas exporters more cooperative.
Peter Martin is a Visiting Fellow at the Crawford School of Public Policy, Australian National University. This article was republished from The Conversation
