CANBERRA (CU)_Tax on offshore gas projects have constantly failed to deliver meaningful revenue to the government of Australia. Accordingly, reforms have been proposed, which could boost tax revenue by almost $90 billion, according to figures issued by the Parliamentary Budget Office.
The data was released by the Green in support of plans to reform petroleum resources rent tax (PRRT). The amendments are expected to ensure the government receives a share of income from gas mega-projects including the Gorgon reserve that is being jointly developed by Shell, Chevron and ExxonMobil. The COVID-19 pandemic, together with lower-than-expected gas prices prior to Russia’s invasion of Ukraine resulted in accrued credit worth $282 billion by multinationals against the PRRT. Commenting on this, Shell, which has 25 per cent stake in Gorgon, said last year that it may never pay a cent in PRRT on gas from the reserve.
Even many of the gas projects which were close to start paying the tax may start paying until the middle of next decade, the Australian Taxation Office (ATO) now believes. The ATO’s second commissioner, Jeremy Hirschhorn, told parliament last year that many credits accumulated against the PRRT are now “trapped” in projects that would never recover their losses.
Accordingly, the Greens’ proposal, which is scheduled to be launched on Wednesday (27 April), specifies that PRRT credits not used by 1 July cannot be used to offset profits in the future. Moreover, the party also proposed a 10 per cent royalty to be levied on offshore projects and avoid double taxation by offsetting them against any PRRT actually paid.
The proposal is expected to boost tax revenue by $24.7 billion over the forward estimates and almost $90 billion over a period of 10 years. However, Parliamentary Budget Office warns that uncertainties around production volumes, project costs, future prices of oil and gas and several other factors 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.”
