The federal government already has a windfall tax on gas income. But while gas prices soar, is the tax doing its job? & More Trending News

The federal government already has a windfall tax on gas income. But while gas prices soar, is the tax doing its job? & More Trending News

There’s not often been a higher time to be an Australian gas exporter.

The struggle in Ukraine has seen demand for Australian gas soar, and pulled prices skyward with it.

And Australia has loads of gas to supply — it is one among the world’s largest LNG exporters, and people firms promoting gas to the world are in a prime place to capitalise.

The gas being offered is owned by the Commonwealth, and licensed to be offered by the firms extracting it.

So how a lot are Australian taxpayers making from the sale of Australian gas?

Right now, most likely not as a lot as you would possibly anticipate.

The windfall tax you have most likely by no means heard of

As gas prices have shot up, there have been requires Australia to attempt to seize a few of that revenue by way of a new tax on gas firms.

Comparisons have been drawn with nations like Norway, which locations a 78 per cent tax on income from its oil and gas firms (a lot of that are partly state-owned anyway).

Others recommend Australia simply reform the taxes already in place.

Australia already has a particular tax for offshore oil and gas initiatives, referred to as the Petroleum Resources Rent Tax (PRRT).

It taxes income from these initiatives at 40 per cent, on the grounds they’re commonwealth assets — so the Commonwealth ought to share in the income.

But regardless of loads of gas being offered, it brings in surprisingly little tax.

The tax has been round since the late 1980’s, as Australia’s oil trade was growing.

Gas is now a a lot bigger trade than oil, however regardless of the trade’s progress, the tax has been bringing in roughly the similar quantity of income.

The income is not even maintaining with Australia’s common financial progress, changing into ever-smaller towards Australia’s rising GDP.

And it is forecast to maintain diminishing — falling from $2.6 billion this 12 months, down to simply $2 billion in 2025-26.

So why is an trade bringing in tens of billions of income, paying so little tax for the gas it sells?

A decades-old tax made for a completely different time

The tax was launched in 1988 to attempt to seize income from offshore oil and gas initiatives, however again then it was largely oil.

The purpose was to attempt to each encourage firms to discover offshore oil and gas, and considerably tax the income made.

Companies would solely need to pay tax as soon as the initiatives had fully paid for themselves — that is, all the cash spent exploring and developing oil and gas wells and the related infrastructure had been recouped.

That’s a pretty regular circumstance — most taxes are solely paid on revenue.

But importantly (and controversially), these constructions prices develop over time, the similar approach curiosity grows and compounds in a financial savings account.

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