Companion rates, or how the Coalition sat on a $100 billion gas tax

An embarrassing report on the state of the environment was not the only document that the Coalition sat before the election.

Try a Treasury briefing on a big carbon tax worth tens of billions of dollars – and maybe hundreds of billions.

“Well, you know, folks – spy on a developing country, cover up a tax scandal, whatever it is.”

So:

  • Five years after the Callaghan Review reported on the Petroleum Resource Rent Tax (PRRT) joke
  • Four years after the coalition government’s response to this report called on the Treasury to quickly review Big Carbon’s gas transfer prices
  • Two years later the Treasury review was to be completed but never seen…

Treasury officials are “now briefing the new government on a number of issues, including the PRRT gas transfer pricing review.”

Presumably, the previous government had been told about it, but didn’t like what it heard.

This briefing comes at a time when Big Carbon’s social license seems extremely tentative: when multinational gas giants are making windfall profits they could never have imagined on the Australian gas they export and pay very little tax. above.

This comes as the Labor Party is too afraid of the word “tax” to do the obvious thing: apply a windfall tax, as the British Conservative Party has done. (And don’t forget that Scott Morrison himself set the precedent for such a windfall tax here when he hit the big banks for another $6 billion – but he called it a “levy” .)

Closing the Gas Gap

Ah, closing a tax loophole – that wouldn’t be a new tax, or even a levy. The Dutton opposition would have a hard time spooking the horses on this, given how badly the Commonwealth has been ripped off by deals with Big Carbon.

The money at stake is huge. Three years ago, the Australia Institute believed that fixing the transfer price of gas could increase Commonwealth revenue by $68 billion between 2027 and 2039, and $89 billion between 2023 and 2050.

And that was when gas was cheap.

Asian liquefied natural gas (LNG) spot prices are now around three times higher than they were in 2019 – so pick whichever multiple of $89 billion you prefer – depending on how long you think Russian gas will have pariah status and how long it will take the world to wean itself off carbon.

LNG transfer pricing is a somewhat mysterious tax issue. Rod Campbell’s 2019 Australia Institute report explains the fiddle for those with patience, but the gist is obvious and has been for years:

Australia, one of the world’s top five gas exporters, is a soft touch for the well-connected Big Carbon, taxing it at far lower rates than Norway, Malaysia, Qatar or India. Saudi Arabia. And the PRRT’s revenue had fallen — it was just $800 million last year, and that was after loopholes tightened.

When the previous government finally responded to the Callaghan review after much consultation with “stakeholders” (“Are you ok with it? Really ok with it? Sure?”), the changes it instituted on the non-transfer elements of the PRRT were projected to raise $6 billion over 10 years – chicken feed versus what was left.

A new model

The PRRT is one of the taxes the Greens have proposed to “fix” ahead of the election. A lecturer in business law and taxation at Monash University, PRRT transfer pricing expert Dr. Diane Kraal offered a better solution: remove the PRRT and levy a direct charge at an appropriate rate instead.

Dr. Kraal’s proposal stems from detailed reviews of individual gas projects since 2016, revealing the billions of dollars in taxes the government was losing.

An often overlooked point is that government royalties/taxes are how companies pay us (the Commonwealth) for our resources which they then sell.

Easily duped and tricked governments have been poor stewards of our resources, leading Australians to pay top dollar for the gas that was theirs in the first place without the ticker to institute a windfall tax.

One of the measures at this week’s landmark meeting of federal and state energy ministers is to allow Australia’s energy market operator to buy gas on the open market and store for emergency use.

It sounds better than Angus Taylor’s emergency oil supplies stored on the US East Coast, but no one seemed to mind charging us the full inflated price of the gas that was ours and we were badly compensated for.

The Treasury briefing to the new government on the PRRT will be interesting, as will its outcome.

Don’t Underestimate ‘Big Carbon’

A series of headlines in recent days suggest that Treasury mandarins could enjoy some fresh air the lifting of the dead hand of the Morrison government.

But Big Carbon’s ability to influence any government should not be underestimated.

New ministers and their new advisers may be threatened with disastrous consequences while being promised desirable results. It is not uncommon for regulators to be captured.

God’s goodness! Alinta, not wanting to spoil a good crisis, is already saying that we must continue to burn lignite – the dirtiest of our fuels – in the medium term.

Self-interest is a powerful motivator.

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