Extraordinary profits generated by rapacious exporters have gone largely untaxed by Coalition governments, as Alan Austin reports.
AUSTRALIANS ARE VASTLY poorer as a result of the failure of the recently-departed Coalition Government to oblige foreign mineral and energy miners to pay a fair price for the resources they are selling abroad.
Gas exports hit ever-higher records
In 2008 (12 months to May), natural gas exports reached a record $6,815 million, more than double the level four years earlier. (Australian Bureau of Statistics File 5368, table 12a.) The industry and the Government were hoping fervently that this high level would continue well into the future. It didn’t.
Less than five years later, by 2013, that level had doubled. It then trebled in 2017 to $21,774 million. The following year, 2018, a phenomenal new record of $50,566 million in gas sales was reached. This was matched in 2019 but exceeded again in 2022 after a dip last year. Gas sales to May this year were a staggering $67,576 million, ten times the level 15 years ago. See yellow chart, below.
These staggering values are the result of soaring prices and increased production, with gas extraction now occurring in every state and the Northern Territory. The exceptional prices are driven by the Russia-Ukraine war and the global economic rebound from the COVID pandemic.
Taxes, levies and royalties not collected
If Australia had been managed as well as other large gas producers – such as Norway, Qatar or the United Arab Emirates – its economy would still be in better shape than theirs. We know, however, from the IAREM rankings, published here last month, that Australia’s economy now ranks 22nd in the world, down from first between 2009 and 2013.
The main reason for this deterioration is that vast wealth has been shunted offshore with little return to Australia’s people.
All governments before 2013 ensured Australians gained substantial benefit from the nation’s vast supplies of natural petroleum gas. But since 2013, when the inept and corrupt Abbott Government took charge, taxes paid by the big foreign exporters have become effectively optional.
Between 2013 and 2018, gas exports doubled. Yet the petroleum resource rent tax (PRRT) collected fell by 23.4%. From 2018 to 2020, export values increased by 62%. PRRT collected fell a further 24.8%. See red and blue chart, above.
The previous Labor Government managed to collect an average of $1.49 billion in PRRT over its journey, despite modest export volumes and prices back then and notwithstanding the devastating Global Financial Crisis (GFC).
The average collected by the Coalition over the last nine boom years is $1.1 billion per year. Export values are now more than four times higher.
Wealth and income lost
Calculating the actual quantum lost by the previous government is tricky for several reasons, including that the PRRT applies to other energy exports besides natural gas. But we can give it a fair shot.
Our conservative estimate is that the Coalition lost between $32 and $38 billion just in PRRT not collected. (Calculations available on request in the discussion, below.)
Besides the federal PRRT and company income taxes, Australia’s states can collect royalties on mineral and energy resources extracted.
Queensland’s Palaszczuk Government recently revised its coal royalty structure in light of current strong demand and hyperinflated prices. Under the new graduated scale, coal exporters now pay 27% of their revenue in royalties.
Pressure is mounting on Queensland to apply the same principle to the gas sector. A report earlier this month by the Institute for Energy Economics and Financial Analysis (IEEFA) showed Queensland’s gas revenues more than doubled over the last year.
This is resulting in massive profits to companies and rising gas and electricity prices in the domestic market.
If the Government placed a similar royalty structure on gas, in the current extraordinary market, it would translate to revenue for Queensland of $6.1 billion in financial year 2021-22, or 27% of the gas industry’s current windfall revenue.
That seems a fair share that the industry should pay to increase the health and wellbeing of Queenslanders for services and infrastructure.
Strategies for recovery
Prime Minister Albanese and Treasurer Jim Chalmers are in an excellent position to restore much of the wealth and income squandered by the Coalition. They have consistently said they would reform multinational taxes, collaboratively with other nations.
Their first strategy should be a hefty temporary levy on all resources exported. The current boom will not last forever, so windfall profits must be shared while it does. That levy must generate an adequate share of current revenue and also claw back some of the extensive losses sustained over the last nine years.
The second strategy is to ensure the industry supplies Australian gas consumers at a price that reflects the cost of production rather than inflated global export prices.
And finally, Dr Chalmers and the state treasurers must rationalise the current chaotic royalty regime so that all states and all citizens enjoy a fair share of Australia’s abundant treasure.
Dealing with the corruption of Coalition former ministers and recovery of illegal transfers can be left to the new Independent Commission Against Corruption.
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