The Senate inquiry into Australia’s arrangements on taxing gas exports absolutely flew by.
Here are a few interesting moments and facts that did not get a lot of coverage in the wider media…
1. War, what is it good for? Gas companies
Treasury made it clear how great war has been for the multinational gas exporters operating in Australia:
Treasury: …Following the Russian invasion of Ukraine [we saw] a run-down of a lot of the accumulated losses in the corporate tax system by oil and gas producers, and that’s what’s led to that increase in tax paid. (Page 59)
In other words, recent gas industry tax payments are due to Putin’s war, not the benevolence or good management of the gas industry.
2. Sorry, can you say that figure again? Gas companies have $282 billion in tax-credits
Despite the war-induced good times, according to the ATO, the gas industry has $282 billion in tax credits remaining before the full Petroleum Resource Rent Tax (PRRT) will be paid by all industry participants. This big number came as a bit of a shock to committee chair Senator Steph Hodgins-May:
Public servant: As at 2023-24, which is the latest data that we have published, carry-forward expenditure was $282,629,000,000.
CHAIR: Sorry, can you say that figure again?
Public servant: $282,629,000,000.
CHAIR: Does that mean that gas companies have to earn another $282-plus billion before they would have to pay full PRRT?
Public servant: …. for the entirety of the current PRRT population to become payable, yes, that amount would need to be. (page 57)
3. A gas export tax would be paid by companies, not consumers in Australia or Asia
Several witnesses were asked about who would pay the tax. All confirmed that it would reduce gas company profits, not increase prices for consumers in Australia or in Asia.
Treasury: “…the economic burden of any tax change would be more likely to fall on the producers.” (page 63)
***
Ken Henry: “overwhelmingly the [tax] falls on those who are the shareholders, really, of multinational companies. That’s where the incidence would fall. Australia is a major gas exporter but is not a big influencer of the world price of gas. (page 56)
***
Chair: “Would you be able to pass [a tax] through to your customers…?”
Origin Energy: “In general, we would have to absorb those costs.” (Page 42)
4. Is Australia like Norway? Or not?
Norway’s taxes on oil and gas have delivered it a trillion-dollar sovereign wealth fund. But according to the gas industry and its supporters, Norway is totally different because it also invests in the gas industry:
Senator McDonald: We’ve heard evidence about the Norway system. Does Australia invest in any of these gas or oil projects itself
Public servant 1: My understanding is that none of the government’s financing vehicles are used to support those kinds of projects. That level of direct investment from the government, I think, would be very limited.
That is on page 65. Just two pages later:
Public servant 2:… [Royalty arrangements reflect] the significant investment that the WA Government put into the North West Shelf project. That included a pipeline that ran from Dampier to Bunbury, which I think was in the vicinity of $1.1 billion. But also, in 2010 present-value terms, they contributed around $8 billion into the investment.
So the WA Government invested around $8 billion into the North West Shelf project, now largely owned and operated by Woodside. And yet when Woodside was asked to comment on exactly this issue:
Woodside: When you start to talk about comparisons to Norway, you are talking about apples and oranges, and some of the information that has been out there is incomplete and somewhat misleading, to be honest. In Norway, taxpayers participate symmetrically in the project—that is, they invest in the risk. Taxpayers contribute to the upfront capital and taxpayers wear the risk of the project, …. They are a part of the underlying project. If we were to replicate that into Australia, that means that Australians will be directly investing in oil and gas projects. (page 23)
Could Woodside really be unaware that taxpayers are key investors in one of their company’s major projects? Or were they just misleading the senate?
5. Woodside goes MAGA
Woodside has several oil and gas projects in the Gulf of Mexico, which Donald Trump has tried to rename the Gulf of America. Mexico is not impressed.
Guess which side Woodside is on? When asked for an example of overseas tax arrangements:
Woodside: As an example, in the Gulf of America, we have … (page 23)
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