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Why we need to redesign the PRRT

Businesses and families in Mackellar and across Australia are being pummeled by soaring petrol prices and energy cost. The prediction revealed in the recent budget that electricity prices are likely to rise by 56 per cent over two years is alarming to say the least. For the average family in New South Wales this price rise will increase their energy bill from $356 a quarter to $555. For many this is the difference between keeping food on the table and the lights on. These soaring energy prices are crippling for individuals, for families, for businesses and for industry. They are especially galling because, at the same time Australians are struggling to pay their bills, energy companies are making exorbitant profits by shipping our natural resources overseas.

Across the sector in Australia oil and gas companies pay corporate tax of around just two per cent of total revenue. The Australian public receives even less from the petroleum resources rent tax, the PRRT, at just one per cent in 2020. And yet these companies have their hands up for subsidies. It's not ethical that Australian families and businesses are hitting the wall at the same time as oil and gas companies such as Chevron, Woodside and Santos are making exorbitant profits. Australians around the country know that this is far from fair, and overwhelmingly want the government to address this and urgently. So how can we ensure that oil and gas companies pay their fair share of tax in this country? It is not reasonable to simply say that more gas supply is the answer. Gas supply tripled in the last decade, and prices did the same.

The PRRT is overly complex and riddled with loopholes, providing companies the opportunity to use accounting tricks to avoid paying tax in this country. For example, the PRRT isn't collected on LNG export profits. Instead, tax is calculated at an upstream price, which is much lower, before the liquefaction process, where the majority of value is added. This is a mega loophole that is costing the Australian public billions. When the PRRT was first introduced in 1992 it collected 19 per cent of total oil and gas revenue. Now it collects just one per cent. In 2021-22 the windfall profits on Australian gas exports were between $26 billion and $40 billion, and yet the PRRT collected a comparatively paltry $1.6 billion. Rod Sims, the former Chair of the ACCC, bluntly said that the PRRT 'patently does not work'.

The government could also introduce a temporary super profits levy on the extra profits made by fossil fuel companies. The UK has done it, President Biden is considering it and that this has long been the process in Norway. In Norway oil and gas profits are taxed at 78 per cent, and since the 1990s this has raised a staggering $1.7 trillion for its sovereign wealth fund, which is equivalent to A$350,000 for every citizen. When compared to the tax arrangements of Norway, Australia barely taxes our resource profits at all. The argument that raising taxes will discourage investment is not the reality. Norway's investment has not declined even though the lion's share of natural resources profits, 78 per cent, goes to the public.

While Australian taxpayers subsidise fossil fuel companies to the tune of $10 billion a year, in Norway it is estimated that government revenue from their oil and gas exports in 2023 will be a jaw-dropping A$209 billion. It's time the government acted to ensure the PRRT is fixed so that Australians benefit fairly from the sale of our resources. The wealth raised would go a long way to repaying our immense national debt and is needed to fund essential public services, such as education, health and the NDIS, as well as the transition to cleaner energy, and climate change adaptation and recovery measures. The government must do the right thing by the Australian people and act to fix the broken petroleum resource rent tax.