Australia could reap more than $24bn over the next four years from fossil fuel multinationals by reforming a tax on offshore gas projects that has consistently failed to deliver meaningful revenue, Parliamentary Budget Office costings show.
The costings were released by the Greens in support of a proposal to reform the petroleum resources rent tax (PRRT), which is supposed to ensure that the commonwealth receives a share of income from gas mega-projects including the Gorgon reserve, which is being developed by a joint venture including Chevron, ExxonMobil and Shell.
But expenditure blowouts, lower-than-expected gas prices before the Russian invasion of Ukraine and the Covid-19 pandemic mean that multinationals have run up $282bn in credits against the PRRT.
As a result, Shell said last year that it expected it would never pay a cent in PRRT on gas from Gorgon, where it has a 25% stake.
The Australian Taxation Office now believes many gas projects, which were close to starting to pay PRRT, will not start to pay the tax until the middle of the next decade.
Many of the credits accumulated by the industry were now “trapped” in projects that would never recoup their losses, the ATO’s second commissioner, Jeremy Hirschhorn, told parliament last year.
Under the Greens proposal, to be launched on Wednesday in Karratha by the party leader, Adam Bandt, PRRT credits not used by 1 July would no longer be allowed to be used to offset profits in future years.
In addition, the Greens propose that a royalty of 10% be levied on offshore gas projects. This would be offset against any PRRT actually paid, to avoid double taxation.
The Parliamentary Budget Office said the proposal would reap $24.7bn in increased tax revenue over the forward estimates and almost $90bn over 10 years.
But it cautioned that there was “a significant degree of uncertainty” over factors including project costs, production volumes, the future prices of oil and gas, and how fossil fuel producers would respond to the change which could “significantly affect the estimated financial impact of the proposal”.
“It is possible that some projects would close sooner than they otherwise would,” the budget office said. “This is because the proposal would reduce the post-tax return on projects, making them unviable.”
The proposal forms part of a suite of Greens policies designed to increase tax on big companies and the super-rich.
“In just one year, 27 big gas corporations brought in $77bn in income but paid no tax,” Bandt said. “When a nurse pays more tax than a multinational, something is seriously wrong.”
He said the tax would help fund another Greens policy, including dental under Medicare.
“The people of WA currently contribute more tax through car registrations than the multibillion-dollar gas industry pays for gas. WA is being taken to the cleaners by big coal and gas corporations, and Australians are being ripped off.”
