We need to tax things we want less of and subsidise things we want more of. Right now with PRRT and HECS, we’re doing it the wrong way round.
Australians will have often heard how our gas industry has been booming over the past 10 years, generating great wealth and supposedly leading our economy. Remember former Prime Minister, Scott Morrison calling for a “gas-led recovery”.
Australians might be less aware of just how little gas companies – who are making massive profits off the back of the Russian invasion of Ukraine – pay in tax.
The Petroleum Resources Rent Tax (PRRT) is a special levy designed to make sure Australians benefit from the extraction of our gas and oil resources, and yet the revenue of the PRRT has barely grown along with the profits and size of the gas industry.
The problem is the way the PRRT is designed. Gas companies can defray costs to such an extent that they can claim to never earn enough profit to be required to pay the PRRT. Tax officials told the Senate in 2021 that Shell, the operator of Australia’s largest-ever gas project, Gorgon, never expects to pay PRRT on the project.
So small is the amount of PRRT that gas companies pay, that Australians pay more than double in HECS/HELP repayments for their higher education than gas companies pay on PRRT. In the seven years to 2022-23 the government collected a total of $14,962m more in HECS/HELP than it did from the PRRT – equivalent to 168% more in tax from HECS/HELP than PRRT.
And while gas companies will argue that they pay other forms of tax, so too do students – income tax and GST and other excises – plus they must pay the costs of attending tertiary education which can involve moving interstate. Unlike gas companies with PRRT, students cannot use these costs to reduce their future requirements to repay HECS.
Our tax system needs massive reform. For too long governments have let gas companies, whose product greatly contributes to increased greenhouse gas emissions that cause climate change, make out like bandits.
Currently, the government is proposing to put a cap on the amount of costs gas companies can defray to limit their PRRT liabilities. The cap which is proposed to be at 90% of revenue however does little more than move some PRRT revenue forward. It does not mean gas companies will be paying more PRRT over time.
The gas company industry peak body actually put out a media release calling for the changes to be passed the day they were announced. When gas companies are happy with the amount of tax they are being asked to pay, you know something is amiss.
Nordic countries subsidise higher education and tax oil and gas companies properly. In Australia, we tax students and subsidise oil and gas companies while also giving them massive tax exemptions.
We need to change the way we do tax. We should tax things we want less of and subsidise things we want more of. We need more Australians in education, fewer gas company profits going overseas and much less greenhouse gas emissions.
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