Tax hikes for oil and gas in Australia
"Oil and gas giants hit with $6 billion tax hikeBy Eryk Bagshaw & Cole Latimer2 November 2018 — 4:51pmShare on FacebookShare on TwitterSend via EmailNormal text sizeLarger text sizeVery large text size11View all commentsOil and gas giants will be hit with a $6 billion tax hike over the next decade following years of concern that Australia has been hemorrhaging lucrative revenue to multinationals.The decision was made after an 18-month wait for the Coalition's response to a landmark review into the sector, which heard Australia would eclipse Qatar as the world's top gas exporter by 2020 but receive just $800 million revenue compared to Qatar's $26.6 billion.Treasurer Josh Frydenberg. Treasurer Josh Frydenberg. CREDIT:ALEX ELLINGHAUSENOne Nation had demanded a crackdown on multinationals in exchange for supporting company tax cuts, but reneged when it became clear that the Turnbull government would not meet its demands for a Qatar-style royalty scheme.The government went further than some in the industry were expecting on Friday by declaring current projects would have previous exploration concessions used to offset future profits crimped from 2019, despite industry threats that would put investment at risk.AdvertisementUplift concessions that allow companies to deduct the cost of risky exploration against future profits will be cut from 15 to 5 percentage points plus the long-term bond rate from July, bringing it into line with less high-risk projects."All along industry has been saying don't touch current projects," said Monash University PRRT expert Diane Kraal. "These changes will effect existing projects which I think is a pretty good compromise."The 30-year-old Petroleum Resource Rent Tax was designed to encourage investment in Australian gas and oil exploration by giving generous tax concessions for projects that can take years and billions of dollars to materialise, but produce very large profits once they are up and running.Chevron’s $29 billion Wheatstone liquefied natural gas project in WA.Chevron’s $29 billion Wheatstone liquefied natural gas project in WA.CREDIT:AFRAustralia's concessions meant that some projects such as Chevron's Gorgon project in Western Australia would not pay PRRT until 2030 despite being profitable.AdvertisementEconomist Michael Callaghan, who led the government inquiry, described the concessions "excessively high". The Henry Tax review in 2010 warned the system failed "to collect an appropriate and constant share of resource rents from successful projects" and "overcompensated successful investors”.Onshore projects, which the government has accused miners of using to transfer deductions to to reduce their tax bills, will be removed from the PRRT regime altogether. No revenue has been collected from them since 2012."These changes will ensure production of our petroleum resources are taxed appropriately while continuing to support the development of our world leading LNG industry," said Treasurer Josh Frydenberg.Mr Frydenberg announced the industry's opaque internal gas transfer mechanism, which allows companies to price gas they extract as it moves down the production line to reduce their tax liability, will also be subject to a new inquiry.A 2017 Treasury investigation into the mechanism has yet to produce a report.AdvertisementThe tax increases will add an extra $6 billion to the federal budget over the next decade, but fall short of what advocates have been calling for.A Qatar-style royalty system, which would have seen a 10 per cent tax applied to all exports would have brought in $15 billion by 2028 according to a Parliamentary Budget Office costing for the Greens and supported by the Tax Justice Network.The Australian Petroleum Production and Exploration Association said the PRRT had delivered $35 billion in revenue and that changes to the treatment of exploration costs were troubling for current and future projects.Chief executive Malcolm Roberts suggested investors may focus on competitive markets overseas due to the high cost of production in Australia.“While Australia has attracted significant investment in liquefied natural gas (LNG) projects over the last decade and global demand for LNG continues to rise, future investment in Australia is far from guaranteed," he said.AdvertisementIndustry heavyweight Woodside said it was time to move on for the sake of business confidence."The PRRT has been under review since November 2016. It is now time for Parliament to promptly pass the proposed changes, in order to provide certainty for all investors," a spokeswoman said."
https://www.smh.com.au/politics/federal/oil-and-gas-giants-hit-with-6-billion-tax-hike-20181102-p50dn6.html
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