Offshore gas projects should be subject to a new 10% royalty to further fix the “broken” petroleum resources rent tax, a report has found.
The McKell Institute has released a blueprint for addressing failings in Australia’s taxation of the resources and extractive sectors, which it says allow major multinationals to avoid paying billions in tax.
The report proposes a 10% royalty to be paid by all offshore gas projects currently only subject to Australia’s petroleum resources rent tax (PRRT), a tax on profits from marketable petroleum commodities.
The PRRT has suffered from prolonged criticism in recent years. In 2015-16, only nine companies paid $845m in PRRT, compared to 12 paying $1.2bn the year prior. The most recent data shows payment of the PRRT has improved to 14 entities paying $946m.
Coalition to spring unexpected tax hike on offshore gas industry
The Coalition last month announced it would attempt to raise $6bn more over a decade from the PRRT, moving to fix some of the long-running flaws in the system. That came on the back of the Callaghan review – commissioned by the then Turnbull government – which heard concerns that “some large LNG projects may not pay PRRT for decades to come, or may never pay PRRT at all”.
The McKell report, authored by Jason Ward of the Centre for International Corporate Tax Accountability & Research, found more changes were needed to ensure Australians were properly compensated for the extraction of their natural resources. It recommends a 10% royalty on projects currently subject to the PRRT.
“The law is broken,” Ward told Guardian Australia. “No one will be paying any PRRT until the mid-2030s at the earliest.”
The report said the 10% royalty would level the playing field and produce $2.8bn in revenue per year.
Super profits tax for miners and ‘Buffett rule’ on Greens’ tax agenda
“Applying a 10% royalty to all offshore gas projects that are currently only subject to the PRRT – a proposal that was the subject of a previous McKell Institute report – is estimated to produce $2.8bn in revenue per year,” the report said. “This compares to Chevron and Exxon both admitting in Senate testimony that they did not expect to pay any PRRT – or any other royalty on the Gorgon and Wheatstone projects until the mid-2030s at the earliest.”
“It is possible, as outlined in some scenarios in the Callaghan Review, that they would never pay any PRRT on these projects.”
The report also recommends introducing ambitious tax transparency reforms. Most notably, it calls for the introduction of country-by-country tax reporting, requiring multinationals to disclose the tax treatment of all their subsidiaries and the nations they operate in.
The report calls for a mandatory tax disclosure scheme for extractive companies, requiring them to disclose all payments to all levels of government. It calls for an overhaul of transfer pricing regulations, and a mandatory tax transparency code.
Source: Read Full Article