Australia’s changes to its tax on big gas exporters will deliver little if any additional revenue, analysts say, with any benefits in the short term coming at the expense of future budgets.
The treasurer, Jim Chalmers, heralded the changes to the petroleum resource rent tax (PRRT) as delivering “a fairer return to the Australian community from their natural resources” that would boost receipts by $2.4bn over the four years to 2027-28.
That sum itself was dismissed by the Greens as “less than the bare minimum”, while the independent MP Monique Ryan says the policy leaves Australia as a “global laggard when it comes to taxing its domestic gas industry”.
For context, the gross profits of LNG exporters exceeded $63.5bn last year, Tim Buckley, director of Climate Energy Finance, said.
But critics have zeroed in on comments from the gas industry lobby, the Australian Petroleum Production & Exploration Association (Appea), who said the PRRT tweaks “would see more revenue collected earlier to address budget pressures”.
The change will from 1 July introduce a cap on the proportion of assessable income that offshore LNG projects can offset with deductions. That cap is 90%. Treasury had offered two other options, including an 80% cap.
“Those deductions that don’t get allowed this year just get delayed,” Buckley said. “It’s absolutely a pull forward … it might be no increase at all” in total revenue.
The Greens senator Nick McKim said the PRRT changes along with Treasury’s own review of the tax indicate the government’s changes were “two-tenths of sweet FA”, merely shifting forward the timing of payments.
“It doesn’t actually impose an additional tax obligation,” McKim said. “Under Labor’s proposal, companies are unlikely to use up the $284bn in deductions that they have stashed away for another decade.”
Guardian Australia approached Chalmers’ office for comment.
The treasurer gave conflicting comments in statements and to the media.
In Sunday’s media statement, Chalmers said the changes would mean the LNG industry “pays more tax, sooner”. But he told the ABC that “the offshore LNG projects wouldn’t be paying [the $2.4bn] were it not for this change”.
Rick Wilkinson, chief executive of data group EnergyQuest, agreed that at least part of the $2.4bn would come from bringing payments forward.
And he said the government had to be careful about the signals it sent to energy companies, including those wanting to develop renewables.
“Long-term investments – whether it is oil and gas projects, renewable power generation or other capital intensive projects – are made based on long-term assumptions about government policies and tax settings,” Wilkinson said.
“Changing this after the project is commenced … has implications for the next projects as it increases the perceived country risk for investment,” he said.
“Australia will need trillions of dollars to invest in the transition to renewables, and global energy companies are watching the risk profile of Australia closely.”
Tony Wood, head of energy policy at the Grattan Institute, said the tax changes weren’t “going to decide whether a [gas] project will go ahead or not”.
“The gas industry should be pretty happy about this,” Wood said, adding the adjustments to royalties “were at the lower end of the possible range”.
If there was going to be a year to go after higher tax from the gas producers, this was it. LNG export volumes are forecast by the Office of the chief economist to exceed $90bn (with gross profits of around $63bn):https://t.co/obrEQyU2Ox pic.twitter.com/Z1LlBjlXy2
— @phannam@mastodon.green (@p_hannam) May 8, 2023
Buckley said the PRRT would collect about $2.6bn this fiscal year, implying a royalty on gas exports from the north and western parts of Australia of about 4.4%.
By contrast, the Queensland government managed to levy a royalty of between 5% and 6% on gas exports leaving that state, Buckley said. The Palaszczuk government’s special tariffs on coal exports, introduced against fierce opposition from the mining sector, would reap royalties of 12%-20%, while even iron exports attracted a 7.5% royalty.
“The gas industry is able get such a discount to every other mining sector in Australia,” Buckley said, adding that lobbying and party donations seem to be playing critical roles.
Shares of energy giant Woodside advanced almost 3% on Monday, with Santos up 2%, both outpacing the overall market’s 0.8% gain.
