Gas cartel gives tax-payers a fearful rogering

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Energy giant ExxonMobil​ has not paid a cent in corporate income tax in Australia in at least two years, despite reaping more than $18 billion from the nation’s natural resources, according to three of the company’s workplace unions.

Tax campaigners accuse the company of cashing in on Australia’s soaring gas prices, but avoiding paying tax on its profits by sending much of its money to a network of offshore companies, some based in notorious tax havens.

The company dismissed the unions’ claims as “misinformation” and said it paid state and federal royalties on its Australian operations as well petroleum resource rent tax and corporate tax.

But in Victoria, where ExxonMobil runs the giant Esso Longford gas plant supplying much of the east coast market, the state government wants an investigation, saying Australians expect a fair return from companies profiting from the nation’s natural resources.

Three unions fighting a bitter industrial dispute with the energy giant will launch a campaign in Canberra on Monday for the Commonwealth to investigate Exxon’s tax affairs.

The Electrical Trades Union, the Australian Manufacturing Workers’ Union and the Australian Workers Union recruited the Tax Justice Network (TJN) to examine Exxon’s tax affairs and say the network has uncovered tax avoidance on a massive scale.

The TJN says Exxon is more aggressive in minimising its tax than Chevron, which agreed to a settlement believed to be worth more than $1 billion this year, after being taken to court by the Australian Taxation Office

Exxon is the latest large corporate player to be revealed using “related party loans” to its overseas entities to minimise or avoid Australian taxes, the unions and the TJN allege.

Classic transfer pricing. The same strategy used by Chevron. Charge yourself huge interest on loans you gave yourself.

But this is the tip of the iceberg. Exxon is a member of the the east coast gas cartel largely by default. It operates the Gippsland JV with BHP. The centre of tax avoidance in east coast gas cartel is Curtis Island where Shell, Origin and Santos all enjoy massive depreciation and write downs on white elephant LNG plants. That ensures huge tax deductions forever on the big cash-margin gas shipped to Asia, as well as the huge rentier margins that they’re enjoying on the same gas drip fed into the Australian market. Of course, other tax revenues are now being recycled as pensioner subsidies for the same cartel.

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Australia’s east coast gas sector is a standing example of epic market and taxation failure.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.