Time to end the PaRRTy for oil and gas giants
1.1
The Greens support this Bill because it is an improvement upon the
existing PRRT. But it would be almost impossible not to improve upon the
existing PRRT.
1.2
The PRRT is the most egregious rort in the Australian tax code. While
the world is in the middle of a LNG boom, the PRRT is flat lining. We're
practically giving the stuff away.
1.3
The fundamental flaw with the PRRT is the overly generous uplift rates
applied to carried-forward expenditure which is used to offset taxable income.
1.4
Most problematic are exploration expenses which compound at 15% above
the long-term bond rate, and can be transferred from one project to another
within a company.
1.5
This is not a revelation. Ten years ago, the Henry Tax Review stated
that:
Although the current PRRT collects a more stable share of
rents in varying economic conditions, it fails to collect an appropriate and
constant share of resource rents from successful projects due to uplift rates
that over-compensate successful investors for the deferral of PRRT deductions.[1]
1.6
Successive Liberal and Labor governments' failure to address this
problem has resulted in oil and gas companies accumulating $324 billion worth
of tax offsets as of 2017-18. This equates to more than 70% of the Commonwealth
Government's total revenue.[2]
1.7
In the years since the PRRT's coverage was extended, the rate of growth
in tax offsets has left behind the rate of growth in taxable profit and tax
paid. On current trends, it is an open question whether PRRT tax offsets will
ever be expired. Some companies might ride a multi-decade long boom and end up
tax positive.
1.8
There are numerous improvements that could be made to the PRRT that
would result in a better distribution to the public of the profits being made
by multinational oil and gas companies from extraction of Commonwealth
resources. These options were well explored by the Senate Economics Reference
Committee's inquiry into corporate tax avoidance.[3]
1.9
Yet the Liberal and Labor parties continue to tinker at the edges and
allow some of the most polluting, biggest tax-dodging companies on the planet
to starve the public of a fair take.
Recommendation 1
1.10
The government bring forward legislation that provides for any or every
one of the following measures that would increase revenue from oil and gas and
improve transparency around oil and gas taxation:
-
A 10% Commonwealth royalty, creditable against the PRRT.
-
The use of a 'shadow price' as the taxing point for LNG under the
PRRT.
-
The application of a single uplift rate for all eligible
categories of carried forward expenditure under the PRRT, applicable from this
point on, irrespective of when the expenditure was incurred; and that this
uplift rate be set at the LTBR where the LTBR is the existing benchmark.
-
The prohibition on transferring carried forward expenditure under
the PRRT from one project to another.
-
The requirement to deduct carried forward expenditure with the
highest uplift rate before deducting any other expenditure, irrespective of
when the expenditure was incurred.
-
The removal of decommissioning costs as a deductable expense
under the PRRT.
-
The reporting of exploration costs to the ATO from the
commencement of a project, irrespective of when tax liabilities are first
incurred.
Senator Peter
Whish-Wilson
Senator for
Tasmania
Table:
Historic PRRT data[4]
| Year |
Taxable profit
($B) |
Carry forward
expenditure ($B) |
PRRT collected
($B) |
Petroleum
exports ($B) |
| 1999-00 |
3.5 |
2.4 |
1.4 |
9.6 |
| 2000-01 |
5.1 |
1.2 |
2.0 |
11.6 |
| 2001-02 |
3.8 |
0.8 |
1.5 |
9.7 |
| 2002-03 |
4.1 |
1.0 |
1.6 |
9.4 |
| 2003-04 |
3.2 |
1.0 |
1.3 |
7.9 |
| 2004-05 |
3.8 |
1.7 |
1.5 |
10.3 |
| 2005-06 |
5.0 |
2.6 |
2.0 |
12.7 |
| 2006-07 |
4.4 |
2.0 |
1.8 |
14.6 |
| 2007-08 |
4.9 |
3.5 |
1.9 |
17.5 |
| 2008-09 |
4.1 |
4.7 |
1.6 |
18.2 |
| 2009-10 |
3.2 |
10.6 |
1.3 |
18.4 |
| 2010-11 |
2.6 |
9.4 |
1.0 |
23.3 |
| 2011-12 |
4.0 |
18.4 |
1.6 |
26.1 |
| 2012-13 |
3.2 |
127.7 |
1.3 |
25.8 |
| 2013-14 |
4.6 |
159.3 |
1.8 |
28.7 |
| 2014-15 |
3.1 |
186.7 |
1.2 |
24.7 |
| 2015-16 |
2.2 |
237.8 |
0.9 |
22.6 |
| 2016-17 |
2.4 |
282.2 |
1.0 |
28.4 |
| 2017-18 |
2.9 |
324.0 |
1.2 |
38.7 |
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