Coalition Senators’ dissenting report
Introduction
Coalition senators are deeply
concerned that the future of Australia’s gas industry, particularly the export-focussed and
environmentally-beneficial LNG sector, is being threatened by an ill-conceived
decision which is nothing more than a cynical revenue-raising exercise.
By imposing an excise on
condensate from the North West Shelf (NWS), the Government intends to raise $2.5 billion in
additional revenue over the forward estimates period to help fund a $15 billion
increase in net government spending.
The way the measure has been
introduced has the potential to seriously undermine investor confidence at a
time when economically and environmentally we should be doing everything we can
to attract more investment in gas exploration and production.
Major LNG projects, such as
the Inpex Ichthys project and Woodside’s Browse project, are key
components of an expected $100 billion worth of new projects in Australia’s
oil and gas sector.
While Australia has
been touted as having the potential to be another Qatar, we
remain “underweight” in terms of LNG projects.
With demand for LNG in the Pacific Basin expected
to grow by 83 per cent by the end of the next decade, Australia
needs to be making the right public policy decisions today aimed at encouraging
investment in gas exploration and production.
These decisions can only be
made if the government of the day sets down a clear, strategic framework which
recognises the unique challenges faced by the LNG industry and provides
investors with the confidence to commit the huge sums of money required over
the long timeframes involved in developing LNG projects.
As the Australian Petroleum
Production and Exploration Association (APPEA) put it, the government needs to
decide whether it is going to plan for the industry’s growth or if it is simply
going to tax the industry to a point of paralysis.[1]
Coalition senators believe
the government’s decision to hit the industry with a new $2.5billion tax grab
confirms the present government is prepared to put short-term revenue raising
ahead of sound, long-term, strategic policy development.
The inclusion of taxation
arrangements for the oil and gas industry in the terms of reference for the Henry Review
confirms that the government has put the cart before the horse and has
imposed this tax increase with no clear understanding of the ramifications.
In summary, our major
concerns, supported by the evidence presented to the committee, are that this
new tax measure:
- is driven by a short term desire
to raise revenue to pay for significant spending increases and not by a
strategic direction balancing the objective of achieving an appropriate return
to the community with the need to provide a competitive taxation framework for
an important industry;
- undermines Australia’s
reputation for low sovereign risk;
- works against Australia’s
ability to attract new LNG investment;
- negatively affects new investment
decisions for Australia’s largest resources project;
- impacts significantly on the price
competitiveness of LNG exporters;
- imposes significant compliance
challenges and costs on the industry; and
- will inevitably lead to higher
domestic gas prices in Western Australia for both industrial and residential users.
Background
Coalition senators recognise
the importance of the gas industry when it comes to ensuring our energy
security, boosting our capacity to help address the challenge of climate change
and helping drive our future prosperity as a nation.
According to APPEA, the oil
and gas sector contributed an average of $5billion a year in taxation revenue
over the five years to 2006-07. The LNG sector is a key component of the
industry and generated export sales worth $5billion in 2006/07[2].
The LNG industry also
generates thousands of jobs, directly and indirectly, and has made an enormous
contribution to the extraordinary economic growth experienced in Western Australia.
The cornerstone of Australia’s
LNG industry has been the massive North West Shelf (NWS) project;
this new measure directly affects this project.
For 30 years the NWS project had
enjoyed a stable fiscal framework, negotiated in good faith with the
Commonwealth, which had helped underpin the largest capital investment in a
resources project in Australia. These arrangements enjoyed bi-partisan support
throughout the years from consecutive governments.
The move to remove the
exemption for this project from the excise on condensate breaches that trust.
It threatens future investment decisions within the venture and, as evidenced
by APPEA, sends a dangerous message to foreign investors on sovereign risk.
It is almost beyond belief
that a government would impose a new $2.5billion tax impost on such an
economically vital industry without carefully thinking through the
ramifications.
Evidence presented to the
Committee confirmed that the Commonwealth had not consulted with the industry
on the planned change, its implementation or its broader implications for the
future growth of the gas industry.
This is surprising given the
well-grounded speculation that this measure had been identified as a
revenue-raising measure by the ALP while in Opposition in the lead-up to the
2007 Federal election.
In April 2008, the Minister
for Resources and Energy, the Hon Martin Ferguson, told the APPEA national
conference in Perth:
Open and transparent investment
frameworks – underpinned by our democratic principles and commitment to strong
governance arrangements – are the key to investment confidence in our nation. [3]
Mr Ferguson’s commitment to transparency did not extend to the
industry itself when it came to the government’s new tax measure.
Ms Belinda Robinson, Chief Executive of APPEA, told the committee:
If we better understood what the
motive was, we could have perhaps worked more closely together to try to look
at the various options for delivering on that motive or that objective and then
discussed what the implications might have been, perhaps even in the context of
the broader energy policy position. We are aware that the government is
embarking on an energy policy process. They are also embarking on the Henry review of
taxation. Perhaps it is within those processes that we can better, more
systematically and more coherently think about what it is that we are trying to
achieve as a nation and take into account all the options for achieving that.
So I guess when we make these ad hoc decisions, it cannot be done within that
context. We are just left to pick up the pieces. [4]
No discussions took place
between Treasury and the North West Shelf Venture to discuss the implications
of the change.
Of even greater concern was
the revelation that the measure had been drafted by the Department of Treasury
without any reference to the relevant expert department, the Department of
Resources, Energy and Tourism[5].
The LNG industry in Australia is
at a crossroads. Australia is in danger of missing out on its window of
opportunity presented by the expected huge growth in demand for LNG in the Pacific Basin over the
next two decades.
Australia is the highest cost destination for LNG investment in
the Asia-Pacific region with our industry facing significant geological and
technical challenges and risks when compared with our competitors.
According to the industry,
these risks and challenges have been counter-balanced by a number of “positives”
including;
- our reputation for low sovereign
risk
- our political stability; and
- our educated and skilled
workforce.
The committee has heard clear
evidence that this new tax measure is already causing considerable damage to Australia’s
reputation for low sovereign risk.
It is difficult to imagine
that a government would renege on a negotiated fiscal arrangement of some 30
years’ standing and not expect there to be any fallout from potential
international investors looking at other major resource projects in Australia.
APPEA told the committee that
the decision had 'raised some investor eyebrows around the world'.[6]
APPEA maintained the Commonwealth’s decision to change the fiscal arrangement
for the NWS project and the way it was done, was more in line with the actions of
governments in Venezuela and Trinidad.[7]
They pointed to a fiscal stability agreement struck with the PNG government
by Papua New Guinea LNG proponents, effectively freezing a fiscal regime for
the life of that project in the context of what may be a possible requirement
for Australia in the future.[8]
At a time when Australia
should be doing everything possible to encourage and promote investment in our
LNG industry so that we are well-placed for the coming boom in demand, our
government has sent an appalling message to potential investors.
This
is particularly disappointing as increasing the production of LNG and
consequently the supply of LNG into China and other nations in the Asia Pacific, could make a
meaningful contribution in addressing the challenge of climate change.
LNG projects require massive
capital investments in the order of $20 billion or more. One consequence of the
long lead times to first production is that LNG projects also have long lead
times for returns on investment. Significantly, the nature of the LNG market is
such that producers are locked into long-term contracts which have usually been
negotiated in a highly competitive market-place.
It is for these reasons that
investors require the highest level of fiscal certainty from government.
The committee has heard that
there is little scope for the companies of the North West Shelf Venture to pass
on this additional tax impost to their foreign clients due to the long-term
nature of their contracts.
This new tax measure is bad
for the industry in that it sends a message that the Australian government is
willing to shift the fiscal goal posts once a project has commenced operation
and after a project has been locked in to long-term fixed-price supply
contracts.
In doing so, the government
has seriously diminished one of the Australian LNG industry’s key points of
attraction for foreign investors and has, by implication, made it more
difficult for Australia to compete with other nations trying to secure new
LNG investments.
It was clear from the
evidence presented to the committee that this was never considered by the
government.
As Ms Robinson told
the Committee:
If you are a board considering
spending $20 billion on an LNG project, you want to know, I think not unrealistically
or unreasonably, that what arrangements you agree with the government for the
lifecycle, for the full lifespan, of that investment, as has been the case
forever in this country, are going to be the rules that apply through the
development of that project. Otherwise you cannot make that investment. No
board would agree to $20 billion of their investors’ money going into a project
if they think that at any time on any sort of whim or for any reason a
government will change that taxation revenue. They simply will not commit those
funds.[9]
Unique secondary taxation
arrangement for North West Shelf Project
There has been some debate as
to whether the arrangement allowing an exemption from excise on condensate for
the NWS project was a negotiated fiscal arrangement or a ‘loophole’.
Related to this is also a
serious question mark over the Government’s assertion that the NWS project had
somehow benefited from a taxation advantage not available to other equivalent
gas projects.
The government has argued
that the exemption was designed solely to assist the NWS project to
get off the ground and that, as the project was now mature and profitable,
there was no further need to maintain the arrangement.
This is a convenient
re-writing of history to help the government justify an additional $2.5 billion
tax.
The fiscal framework which
helped create the NWS project was established by the Western Australian
government of Sir Charles Court and the Federal government of then Prime
Minister Malcolm Fraser.
Since then the NWS project has
paid billions of dollars in royalties and excise to both the Commonwealth and
the State of Western Australia. In the 12 years between 1995–96 to 2006–07 the NWS project
contributed $6.5 billion in royalties alone.[10]
In other words, the NWS project
partners honoured their side of the arrangement. On the other side, consecutive
Coalition and Labor Federal governments maintained the fiscal arrangements put
in place at the time.
The Government has now tried
to argue that with this new tax measure it is in fact closing a loophole and
removing a tax advantage. The Treasurer has been quoted in the media as saying
that
most people in the industry
believed it was time the tax advantage for the North West Shelf ended[11].
The response from Mr Don Voelte, CEO of Woodside (one of the NWS partners)
to this claim was emphatic:
this is not a loophole or a free
ride which has come to an end. This is a negotiated fiscal arrangement which
formed the basis of Australia’s largest resource development.
Treasury officials told the
committee:
Contrary to suggestions from
industry we have not been able to find any statements or documents which
suggest that the exemption was supposed to apply indefinitely.[12]
But in a response to a
question on notice from the Estimates hearings, Treasury’s line had softened:
Treasury does not have any
information to confirm or reject the original arrangements asserted by
Woodside.
In evidence before the
Committee, Treasury appeared confused about the secondary taxation status of
the NWS project as demonstrated by the following evidence by Mr Brown:
...the project has had an
exemption from all secondary taxation at the Commonwealth level, not
counting the royalty arrangement which is in place with the states. It has been
exempt from crude oil excise for 30 years.[13]
And
a bit later Mr Brown said:
...the project that we are talking
about has enjoyed for 30 years an exemption from the secondary taxation regime
to which it was subject.[14]
The reality is that this
evidence was incorrect.
The North West Shelf Project
has paid royalties on all products produced by the Joint Venture and excise on
all oil produced from the venture from day one.
Specifically, the North West
Shelf Project has paid:
- Petroleum royalties,
set a rate of between 10 and 12.5% of the net wellhead value of production
from each licence area. Unlike PRRT, petroleum royalties are payable from
the commencement of production from each licence area. Commonwealth
royalties apply to North West Shelf production, while state/territory royalties
apply to projects under non-Commonwealth jurisdiction; and
- Crude oil production
excise associated with crude oil produced from each petroleum field. Crude
oil production on the NWS has not been excise exempt.
Treasury has since confirmed
in an e-mail to the Committee secretariat that this understanding is indeed
correct.
For all the government’s
bluster on the ‘loophole’ issue, Treasury cannot provide any information that
would indicate there was in fact not a clear understanding that the exemption
was part of an agreed fiscal arrangement.
The loophole issue is itself
a red herring from the government designed to divert attention away from the
nature of the fiscal arrangements agreed to for the NWS project as
compared to similar oil and gas projects since.
The North West Shelf project
was required to pay royalties and excise from first production - that is
irrespective of whether profits were made.
Offshore gas projects since
are subject to the profits-based Petroleum Resource Rent Tax (PRRT), which includes
a range of deductions for ‘allowable expenditure’ (including compounding).
This was confirmed by Mr Hartwell, Head
of the Resources Division in the Department of Resources, Energy and Tourism,
before Senate Estimates on 2 June 2008:
Mr Hartwell– ... on all
projects offshore—with the exception of the North West Shelf leases—they are
subject only to the petroleum resource rent tax. In the North West Shelf they
are subject to excise plus royalties.
Senator CORMANN—So
all projects offshore other than the North West Shelf do not pay excise or
royalties, including excise on condensate?
Mr Hartwell—That is right, because they are subject to the
petroleum resource rent tax.
The net effect is that those
projects often do not pay any secondary taxation for many years after
production commenced. This system of secondary taxation was introduced after
the fiscal arrangements for the NWS project were put in place. The structure of the PRRT
system recognises the marginal nature of these capital intensive projects with
high investment costs and low initial returns to help facilitate those
investments.
The head of the Resources
Division in the Department confirmed this before Senate Estimates on 2 June 2008:
Mr Hartwell—Our experience would be, given it is a profits-based
tax, most projects would not incur PRRT until five to 10 years at least.
Sometimes the more marginal ones may not even incur a liability on petroleum
resource rent tax at all.
This
means that the North West Shelf project carried more risk for an extended
period of time when compared to other offshore gas projects today.
In
an ASX
announcement the day after the budget, Woodside
CEO Don Voelte said:
relief from condensate excise was
among a range of measures between the North West Shelf participants and the
Commonwealth and Western Australian governments that underpinned the economic
viability of the project, while guaranteeing early financial returns to
government. [15]
Importantly, Mr Hartwell from
the Resources Division in the Department has previously argued before Senate
Estimates that if the NWS project had in fact been subject to PRRT, that over
the life of the project the secondary taxation liability would have been about
the same. [16]
If that is indeed the case,
then clearly the NWS project did not enjoy a taxation advantage and would
now be actually worse off as a result of this measure compared to other
offshore gas projects subject to PRRT.
The evidence of Eve Howell, Chief
Executive Officer of the NWS Venture, indicated significant concerns that the new
tax arrangements would place the NWS project at a comparative disadvantage:
I think the comment has been made
about level playing fields and so on. We would like to see not just from our
own work but from the government departments some evidence that this really is
a level playing field.[17]
The evidence indicates the
government has mounted a deceptive and dishonest public campaign to paint the NWS project as
being the recipient of a free ride through the excise exemption.
To properly assess fairness
or whether there has been an unfair advantage, taxation arrangements for
relevant gas projects would have to be considered over the life of the project.
Capital intensive gas projects since 1987 will incur no secondary taxation
liability in the early stages of the project and a tax on profits once the
project has become profitable. The NWS project had its secondary taxation liability more
evenly spread across the whole project life cycle. The NWS project
paid royalties and excise irrespective of profitability.
The Government now no longer
wants to recognise the comparatively higher contribution made by the NWS in the
earlier years and increase taxes based on a perception of increased
profitability in the later years.
During the inquiry the
proposition was put to Treasury that the government needed to substantiate its
assertion that the NWS project enjoyed a taxation advantage compared to
offshore gas projects subject to PRRT. Treasury was dismissive only stating
that:
Mr Brown—The project that we are talking about has enjoyed for
30 years an exemption from the secondary taxation regime to which it was
subject. Other projects are subject to another secondary taxation regime and
are not exempt from that.
The NWS project was
not of course exempt from the secondary taxation regime to which it was subject
and neither Treasury nor the government have presented any evidence that it had
gained an unfair advantage from those fiscal arrangements.
On the contrary, it is clear
the NWS project accepted significant additional risk by being required to pay
excise and royalties from first production and in doing so providing early
returns for government.
Furthermore, the Government
appears to have underestimated the impact of this measure on future additional
investment on the NWS itself.
Additional investment on the NWS subject to
the excise regime, including the additional excise on condensate, will not be
deductible while for projects subject to PRRT it would be.
This was pointed out by the NWS Venture in
its submission:
For fields that have exceeded 30
million barrels of excise free production, future investment decisions to
either enhance or expand production from a field or project will now face a
fundamentally different risk/reward framework. As the excise system does not
allow a deduction for incurred costs (unlike the PRRT and royalty regimes),
project proponents may consider alternative investments if the impact of excise
adversely impacts on project economics, leaving hydrocarbon resources in the
ground that would otherwise be economic to produce.[18]
The NWS project now
faces the clear possibility of being placed at a comparative disadvantage in
taxation terms to other offshore gas projects which did not have to accept the
same requirement for early taxation payments.
It is clear that all these
issues should have been considered and addressed by the Henry Review before
any changes were made to the fiscal settings for the NWS project in
this ad hoc fashion.
Compliance costs for gas
projects
The government’s failure to
consult with the industry on this new tax measure has left the industry with a
compliance nightmare.
It is clear that neither
Treasury nor Finance fully understood the practical implications for
implementing this new tax measure.
Treasury had assured the
committee that implementation of the new measure, which came into effect on
Budget night, was relatively straightforward.
The evidence from industry
confirmed that Treasury had badly misjudged the implications.
Noel
Mullen, Deputy Chief Executive, APPEA, told the committee:[19]
Mr Mullen—There seems to be a misunderstanding that there is
some parallel between the royalty and excise regimes. While they apply in
tandem, they are very different regimes. ...
Senator CORMANN—So
Treasury had that misunderstanding, did they?
Mr Mullen—Well, the royalty regime applies on a licence area
basis, which bears no resemblance to the geography or geology of a field,
whereas the excise regime is very much field and accumulation driven. The
information that would have historically been kept by companies in relation to
royalty will bear very little resemblance to what is required for the excise
regime. So really to assume that someone is in a position technically to move
straight into a new regime, such as on budget evening, probably fails to
understand the differences that exist between the two systems.
Of
even greater concern was the evidence that the new tax regime would require
on-shore gas producers to incur significant compliance costs even though they
may never be required to pay the excise.
Mr Mullen—The evening of the announcement, which was the
proposed date of effect, there were obviously some obligations which
immediately flowed to both the North West Shelf participants and onshore
producers. ... While on the surface the number of fields which might be
relevant in the North West Shelf is quite small, because the measure applies
onshore, there are numerous fields onshore which now are captured by the
regime.
The North West Shelf partners may
be in a better position to outline where they are on their dealings. But
certainly a lot of onshore players who have never been captured by the regime
before are still coming to terms with what they are required to do even though
in reality they will probably not incur an excise liability for one reason or
another.
Senator CORMANN—So they would have additional compliance costs and an
additional compliance burden but there will actually not be any additional
revenue for the Commonwealth, as far as you can see?
Mr Mullen—Certainly based on the information we have, it is
very unlikely that any onshore discoveries will incur an excise liability.
The evidence before the
committee indicates these on-shore companies will incur compliance costs with
no benefit at all to Commonwealth revenues. Domestic gas consumers in Western Australia,
however, will face increased gas prices as these additional compliance costs
will inevitably also be passed on.
Higher domestic gas prices
Apart from compliance costs
placing upward pressure on domestic gas prices, it is inevitable that gas
producers will seek to recover the revenue they will lose from the removal of
the excise exemption.
Woodside’s Chief
Financial Officer Mark Chatterji has warned gas consumers that his company
cannot absorb the cost of the tax increase:
In order to stay
competitive, businesses seek to pass cost increases on to their customers. This
is especially true for Woodside, given that we are reinvesting 100 per cent of
our profits and borrowing billions of additional dollars in order to build our
Pluto LNG Project here in Western Australia.[20]
The NWS will
inevitably seek to pass on the additional costs arising from the excise changes
as domestic gas contracts come up for renewal. Given the NWS supplies
60% of the gas to the WA domestic market this will place strong upward pressure
on gas prices at a time when there is already pressure on gas prices.
Evidence to the committee
also indicated that LNG contracts are long-term agreements, often negotiated in
a ‘buyers market’, with little scope for price variation.
The NWS project
will lose $2.5 billion to this new tax measure over the period of the forward
estimates.
Ms Robinson told the committee:
The North West Shelf is taking
the hit. Of course, it’s going to be up to them as to how they pass that
through.
They have long-term contracts for
the sale of their gas. I think that is a really important thing to remember
with the gas industry; they are subject to long-term contracts. Some of them
are not particularly favourable, but they were signed off at a particular time
that you wear. So the options really are to take it on the chin, take it off
your bottom line or to pass it through in your future contracts—so from here on
in. Of course, most companies are required to stick with their rates of return
or their hurdle rates that are agreed through their boards, so that means that
they need to be passed through in some way, shape or form.
Apart from the cost of the
tax itself being passed on, there is also going to be further pressure on the
price of gas as a result of not encouraging increases in supply at a time of
significant increases in demand. The way the new tax was introduced, the impact
that this will have on our sovereign risk profile and the implications of that
in terms of investor confidence could well make investment in new gas projects
less attractive.
Potential investors
contemplating new gas projects will need to factor in higher gas prices to
ensure the economics of the project are sound. As there is little price
flexibility in the export market, those higher prices, again are more likely to
be paid by domestic consumers in Western
Australia.
As Ms Robinson said
in evidence to the Committee:[21]
Ms Robinson—I guess the point we are making is that it is simply
one that will affect the economics of whether or not the project goes ahead.
One of the reasons why the excise exemption was there was this recognition that
condensate was co-produced with gas and that that was often the driver or the
reason why we were able to commercialise the gas project. Once that goes, it
makes it much more difficult to commercialise the project because that is of
much higher value. So the decision then becomes not one as to how you pass it
off or where you cut the costs. It is just one about whether it is economic for
the project to go ahead at all.
Senator CORMANN—But
your recommendations are very specific. You want the committee to note that gas
producers may now require higher prices on gas sales to underpin or support
project economics. So what does that mean in practice?
Ms Robinson—Well, that is one way of addressing those economics.
If the project is to go ahead, obviously the sales price of the products that
you are selling will have to be higher because it has to make up that
difference.
Senator Eggleston
– If you are not getting the income
from condensate to balance out the-
Ms Robinson – Because
you are having to pay the excise on the condensate, which was otherwise exempt
from the excise.
Senator Eggleston
– So your income has reduced.
Therefore, you will have to increase costs to the buyer?
Ms Robinson – Yes, that
is right. If you meet your hurdle rate, which is a marginal rate to begin with.
It should be noted that while
the $2.5billion raised by this new tax measure will go to general revenue for
the benefit of all Australians, the cost from higher gas prices will be paid
only by Western Australian families and businesses.
The warnings of higher
domestic gas prices as a result of this new tax measure have fallen on deaf
ears with the Premier of Western Australia, Mr Alan Carpenter, simply stating:
...the companies have been the
beneficiaries of the tax exemption and it is up to them to respond on the
impact to their bottom line and operations
This is, at best, a
serious misjudgment of the situation. At worst, it is a callous disregard for
the impact on Western Australian families of higher gas prices caused by this
new tax measure.
Even after Woodside publicly
confirmed that it may have to pass the additional $2.5 billion cost on to their
customers, Premier Alan Carpenter
decided to shoot the messenger attacking Woodside rather than to commit to
representations in Canberra on behalf of Western
Australia.[22]
Treasury confirmed to the
committee that it had not done any modelling on the impact of this new tax measure
on domestic gas prices. In light of Mr Chatterji’s comments, this would appear to be wilfully
negligent on the part of the government.
Treasury was not prepared to
rule out an impact on the price of domestic gas:[23]
Senator CORMANN—So you can absolutely rule out that there will be any
flow-on effect in terms of domestic gas prices as a result of this measure?
Mr Brown—I am saying that the prices you are talking about are
generally set in international markets and this would not have any impact on
those prices.
Senator CORMANN—So you cannot rule out that there would be a flow-on
effect on domestic gas prices.
Mr Brown—All I can say is that I would not expect there to be.
Summary
By ambushing the oil and gas
industry with its Budget night announcement, the government has already done
significant damage to Australia’s reputation for low sovereign risk and as an
attractive destination for resource-based investment.
It has also created a
compliance nightmare for both itself and oil and gas producers.
There can also be no question
that domestic gas prices will rise for Western Australian families and
businesses.
The price competitiveness of Australia’s
LNG producers has been damaged and Australia’s ability to fully exploit its gas resources has been
diminished.
This is the price we are
paying for a naked grab for cash by a new government which over-committed
itself with big spending promises during an election campaign.
The North West Shelf project
has been viewed as a soft target for the government.
More than 30 years of trust
and cooperation between the venture and the government of the day had helped
ensure Australia’s gas resources would be exploited for the benefit of
all Australians.
Having delivered on their
side of the deal, the venture partners have every right to feel they have been
treated shabbily by this new government.
The oil and gas industry has
made it abundantly clear that it is neither afraid of nor opposed to sensible
tax reform.
This should have been done
through the Henry review against the background of a strategic
framework which would allow the industry to grow and position itself for the
opportunities of the coming decades.
As Ms Robinson put
it:
We have a choice. If we want to
deliver benefits to Australia from Australia’s oil and gas industry, we can just keep taxing it
into oblivion or paralysis or we can look at the way we can use our fiscal
regime to grow the industry so it can continue and multiply the benefits that
it delivers back. [24]
Instead
the government has opted to use a blunt taxation instrument to prop up its own
budget surplus and further burden the industry.
The
irony of this move will not be lost on Western Australians who pride themselves
on the massive contribution their state’s resources sector makes to the
national economy.
Prior
to the 2007 election Kevin Rudd said:
Here in the West, so much money
is generated for the public revenue in Canberra out of these great resource projects. But you know
something? Not enough of that money is given back.
The West gives so much to the
nation’s economic development. The West is currently being short-changed. [25]
The
removal of the exemption on excise on condensate for the NWS project
takes an additional $2.5billion out of Western
Australia and returns nothing to the
state or its people.
Western
Australian gas consumers will end up carrying the burden of this additional tax
as it is inevitably passed on.
Finally,
there is a real concern about the long term damage this ill-conceived revenue
measure will do to Western Australia’s ability to unlock the huge potential of its
off-shore gas resources for the benefit of future generations of Australians.
Coalition
Senators note that Labor did not go to the election promising new taxes.
The
Coalition is opposed to increasing taxes – we want to reduce the burden of
taxation.
In
short, Coalition Senators consider that it is economically irresponsible to
increase taxes when the economy is slowing.
Accordingly,
the Coalition Senators on the committee do not believe this additional tax
measure should be supported.
Senator
Alan Eggleston
(Deputy
Chair)
Senator
Mathias Cormann
Senator
David Bushby
25 August 2008
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