Via the AFR:
Planned changes to toughen the Petroleum Resources Rent Tax are being temporarily withheld, in part so they can be used as leverage should One Nation waver in its support for the remainder of the company tax cuts, senior sources have revealed.
Petroleum and gas giants have told The Australian Financial Review that the changes to the PRRT, which would toughen allowable deductions, failed to appear in the federal budget as expected because they might be needed to salve One Nation, which is harshly critical of tax minimisation in the industry, especially by Chevron.
A government source agreed this was part of the reasoning behind the decision to leave the announcement out of the budget.
Here’s what Pauline Hanson said last week:
The mischief with the petroleum resource rent tax is that it allows claimed expenses to compound at rates set annually. A handful of companies, including Chevron, ExxonMobil and Shell, have more than $240 billion in tax credits created by concessions in the petroleum resource rent tax. These concessions mean that claimed expenses double every four years. This snowball effect means foreign multinationals will not pay tax during the life of these integrated gas export projects. The government could have made a regulatory change to the method of valuing gas but has not done so, with the result that $20 billion will stay with a few petroleum companies instead of the people of Australia.
Dr Kraal, an academic at Monash with an interest in petroleum taxation, notes that four of the largest integrated gas projects in Australia, producing 44 per cent of Australia’s natural gas, will raise no petroleum resource rent tax and scant income in the foreseeable future. We say that this is possibly for the 40-year life of these projects. We say that there never was a need to provide the generous concessions in the petroleum resource rent tax, because massive investments were made in Papua New Guinea without them. The PNG government got an equity share, a royalty, income tax and a super-profits tax arising from the establishment of the Hides gas-processing plant in the remote Southern Highlands of PNG, while we do not get any equity shares or royalties.
You’re probably wondering how PNG got a better deal than we did. Well, the PNG government listened to the Australian government Treasury officials who advised them, while our government ignored them. One Nation has been speaking to government about reducing the overly-generous concessions in the petroleum resource rent tax law and the need for a common royalty regime. The government, however, are unwilling to entertain a royalty regime, saying that it’s a sovereign risk, even though they know it is a cashflow issue.
Most petroleum-producing countries in the world receive royalties in exchange for extraction of their oil and gas. Qatar receives more than $10 billion a year on sales of gas. We get less than $400 million a year. State governments get royalties for their gas, but not the Commonwealth of Australia. Royalties are the price of taking the gas. They represent an expense for goods sold. The benefit of royalties is that they would give us the income earlier and allow us to increase the age pension and other pensions almost immediately.
Right. So don’t fall for the Government’s bullshit PRRT reforms which only apply to future projects. They must be retrospective or they are useless. Indeed, if there is no domestic reservation they will also be useless, with the east coast cartel passing rising costs on to households and business.
Also, ignore the balderdash emanating from industry that China has cured the LNG glut. It has shrunk it a little but it remains immense:
It is comprehensive gas reform or it is nothing.
