Why Australia taxes beer more effectively than its gas exports

In the last Senate Estimates, much attention was focused on Senator David Pocock’s question about whether beer excise raises more revenue than the gas industry pays in Petroleum Resource Rent Tax (PRRT).

It’s true. Beer excise is around $2.7 billion compared to PRRT at $1.5 billion as a Treasury official explained to Senator Pocock.

Senator Pocock then asked, Australia’s Finance Minister Katy Gallagher how this could be possible – that a major gas exporting country could raise more money from beer than gas.

In response, Minister Gallagher pointed to changes made by the Government to the PRRT by the Government in 2023, implying that these changes had been significant.

Far from fixing the problem of low PRRT revenues, PRRT revenue is expected to fall further over coming years, while beer excise just keeps on rising, as shown in the chart below:

As shown in the chart, following the introduction of the Government’s PRRT changes, beer excise raised $2.7 billion, almost double the revenue raised from the PRRT ($1.4 billion), and the Government estimates the amount of PRRT revenue will fall by around 25% from current levels to just over $1 billion by 2028.

One reason given by the Government for the continued fall in PRRT revenue, despite their changes, is that oil and gas companies can claim the cost of decommissioning as a deduction against what they would otherwise owe in PRRT (and company tax). The gas industry’s decommissioning costs estimated to be as high as $66 billion with industry analyst Saul Kavonic estimating Australian taxpayers could be on the hook for 60-70% of that.

The inadequacy of the PRRT is obvious when we compare it to the enormous increase in oil and gas industry revenue over the last decade, including $100 billion of windfall profits during the period of record global gas prices following Russia’s invasion of Ukraine.

Senator Pocock has added his voice to calls for a 25 per cent tax on gas exports.

The idea, suggested by the Australian Council of Trade Unions last year, could raise 17 billion dollars a year in revenue according to analysis by the Australia Institute.