The tax man cometh for the gas industry

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OPINION: The Labor government is not about to follow the UK example of a windfall profits tax on the gas industry but high prices and a push by the ATO means the budget will still get billions of extra dollars in revenue from offshore LNG projects.

As well as demanding a ban on new coal and gas projects, the Greens are naturally quick to insist that a Labor government should impose a windfall profit tax on resources projects benefiting from high prices.

Before the election, for example, Labor’s small target strategy meant the opposition limited itself to raisingby making changes to how deductions for debt were structured and imposing greater restrictions on tax havens. Despite the emotive rhetoric of a “crackdown”, this is relative to corporate tax of about $100 billion this financial year alone.

This is another big win for the ATO in its long-running disputes with BHP and Rio Tinto over the costs and pricing assigned to their marketing hubs in low-taxing Singapore. In another significant settlement in 2018, BHP paid the ATO more than $500 million in revised tax assessments over five years.Even so, Anthony Albanese’s expression of enthusiasm for the potential of other pending ATO settlements has to be put in a more complicated context for the resources industry.

The huge upfront costs for LNG projects meant bigger tax write-offs over a longer timeframe with most gas companies considered unlikely to be liable for the tax before the end of the decade at best. Most of the money raised by the PRRT – about $1 billion last financial year – has instead come from declining oil fields in the Bass Strait.that his October budget would not include an increase to the PRRT. Thanks to higher oil prices, Treasury expects to raise $2.

 

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