Right now the gas industry is booming, but the Petroleum Resource Rent Tax is not.
This week’s Budget revealed that at a time of soaring LNG exports Australians are missing out on the benefits of the mining and exporting of our natural resources.
Due to the Russian invasion of Ukraine gas prices have soared across the world, and the value of LNG exports from Australia has increased with those prices. But the latest Budget Papers show that the level of Petroleum Resource Rent Tax (PRRT) being raised is barely shifting.
In the latest Budget Papers the PRRT is forecast to raise $2.6bn in 2022-23, $2.45bn in 2023-24 and then just $2.1bn in 2024-25 and $2.0bn in 2025-26. That would mean in 2025-26 PRRT revenue would be worth just 0.08% of GDP – around half the level that was raised from the PRRT during the early to mid 2000s.
This is happening while exports of LNG are hitting record heights. Unfortunately, the PRRT is so poorly structured that gas companies are able to avoid having to pay any of the tax through write-downs and profit shifting.
In 2016-17 every $7.30 of exports in the petroleum resources sector equalled $1 of PRRT. In this current financial year, just $1 of PRRT is raised for every $13.60 of petroleum sector exports. If the ratio had remained steady, the PRRT would raise around $1.4bn extra than is currently estimated.
Australians are missing out on revenue that could be used to fund vital services and benefits and crucially help invest in the transition to a zero-emissions economy. The gas sector is massively increasing Australia’s emissions, it should be paying its fair share to help reduce them.