Kate Chaney (Curtin, Independent) Share this | Hansard source

I thank the member for Mackellar for raising this matter of public importance. Australia is the second-largest exporter of liquefied natural gas in the world. When international gas prices go up, you'd expect a country like Australia to benefit. But, when prices spike, Australians are not receiving their fair share of the upside.

There are two fundamental problems with the tax system applying to our gas exports. Firstly, gas exporters largely do not pay Australians for the gas they extract and sell. This gas belongs to the Australian people. For most resources—coal, iron ore or onshore gas—companies pay royalties for the rights to use it, but most gas exports are subject to no royalties. That means vast quantities of Australian gas are sold overseas without Australians receiving a direct return for the resource itself. Secondly, Australians do not capture our fair share of upside when prices surge. Economists across the political spectrum agree that it's sound policy to tax economic rents—the superprofits that arise from unexpected price spikes. Taxing economic rents does not discourage investment or production because companies still earn an acceptable return.

These two problems mean that the only way Australians get a benefit from gas exports is through the company tax system. When gas companies make more profit, they pay more company tax. This is important but not enough. The gas companies do not pay for their use of our resources, and they do not share in the unexpected windfall of international price spikes. Two facts make this point. First, other major fossil-fuel-exporting countries typically capture between 75 and 90 per cent of profits from fossil fuel companies for the public. Australia captures less than 30 per cent. Second, since the price of gas surged from the war in Ukraine, the gas exporters have made windfall profits approaching $100 billion. Much of that profit was earned on royalty-free gas, and little PRRT was paid. At best, around $20 billion was collected in company tax. In proportional terms, nurses, teachers, tradies and truck drivers pay a higher effective tax rate than these companies.

In Australia, the petroleum resource rent tax was meant to address both the problem of not paying for our gas and the superprofits problem, but it has failed comprehensively. The PRRT scheme was designed for oil projects, not gas projects. Because deductions are so generous and uplift indefinitely, many gas projects have never paid PRRT and likely never will. The Commonwealth collects more revenue from beer excise than it does from the PRRT. So what do we do about it? Well, we can agree that Australians must get their fair share for their resources, but we must be careful that changes don't cripple an industry currently vital for WA and Australia.

There are a range of reform options available. Gas companies need to either pay for all the gas they extract and sell overseas, because it's our gas, or share the upside from external shocks, like war, more fairly with Australians, or a bit of both. Sharing the upside could be done in a few different ways: by fixing the PRRT; by introducing a targeted windfall-profits tax; or through a two-way cash-flow tax, with the government sharing both upside and downside.

Now, the hardest thing about changing the tax treatment of these big gas projects is the purported sovereign risk. Investment decisions were made based on an expectation, at the time, that the tax treatment wouldn't change. We need investors for big projects in Australia if we're going to make the most of the new energy opportunities ahead of us, and we don't want investors to back off because we change our tax position all the time. Certainty is needed. But the sovereign-risk argument is often overstated by gas companies. We are a stable, rule-of-law democracy, with world-class resources. Plus, these gas companies should know that the deal they're getting is too good to be true.

This is a solvable problem. There are options that could ensure Aussies get their fair share, without crushing an industry that will remain important for WA and Australia for some decades whether we like it or not. The best option will be simple, with limited loopholes, and will ensure Australians capture a fair proportion of the value of our gas during both crisis and normal periods. The solutions exist. What is needed is the political will to ensure that our resources truly work in the public interest—not just for a fortunate few, but for every Australian.

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