It would appear that successive federal and state governments have allowed the resource and energy sector to take Australia for everything except the gold fillings in its teeth……..
2 Office of the Chief Economist, Resources and Energy Quarterly, December 2016; Office of the Chief Economist, Resources and Energy Quarterly, December 2015; Office of the Chief Economist, Resources and Energy Quarterly, December 2014.
[Australian Taxation Office (ATO) 30 March 2017 submission to Senate Standing Committees on Economics, Inquiry into Corporate Tax Avoidance]
The Sydney Morning Herald, 29 April 2017:
Multinational gas companies will soon sell an annual $50 billion worth of Australian liquefied natural gas to foreign markets, but the nation will have to wait more than a decade for any revenue boost and some projects will never pay a cent in tax for the resources they extract.
A report prepared for the Turnbull government into the petroleum resource rent tax has confirmed fears, first revealed by Fairfax Media in 2015, that revenue from offshore gas will continue to flatline until at least 2027.
Despite that, Treasurer Scott Morrison insisted on Friday that Australians were not being shortchanged, but said the government would consider some changes to the system.
The review of the PRRT by former treasury official Mike Callaghan has acknowledged there are systemic problems and recommended changes to toughen the system for new LNG projects.
But, in a clear victory for the $200 billion industry, he shied away from urging any major changes for projects already past the investment stage, including Chevron's giant Gorgon and Wheatstone ventures and Shell's Prelude project.
The Callaghan report was released amid the political wrangling over east coast gas supply and on the same day the Senate inquiry into corporate tax avoidance grilled LNG bosses in Perth.
The Sydney Morning Herald, 26 April 2017:
Foreign-owned gas companies have legally avoided paying significant tax on billions in earnings from their Australian operations because of loopholes, according to a study.
The loopholes have allowed the companies to write off interest payments for the borrowings of offshore subsidiaries, it has been claimed.
The study, by academic accountants at the University of Technology School of Accounting, and left-leaning campaign group GetUp, looked at the available balance sheet data of gas giants ExxonMobil and Chevron. It found the two companies have achieved colossal revenue flows from their Australian operations but paid little if anything in petroleum resource rent tax in recent years.
The practice is known as "debt loading" or "thin capitalisation".
Over the two years 2013-14 and 2014-15, Chevron earned more than $6.12 billion in revenue, but paid nothing in PRRT, according to the assessment.
It found ExxonMobil achieved revenue of almost three times that at $18.08 billion in the same period, but paid only $803.5 million.
The study concluded that between the operation of the company tax rules and the petroleum resource rent tax regime these enormous multinational resources companies can "load up" their balance sheets with excessive debt, thereby reducing taxable income to the point where the tax liability is low or non-existent.
The report, Investigation into the Petroleum Resource Rent Tax and Debt Loading in Australia – 2012 to 2016, found 95 per cent of oil and gas projects in Australia paid nothing in PRRT in 2014-15.
Australian Petroleum Production & Exploration Association (Appea) Ltd, Submission to the Review of Commonwealth Petroleum Resource Taxes, February 2017:
APPEA does not consider a case exists for any changes to be made to the existing PRRT provisions.
Oil and gas corporation Santos Limited currently seeking to establish coal seam gas fields in NSW stated in a 3 February 2017 written submission to the current Senate inquiry into tax avoidance:
Santos has participated in a number of offshore and onshore oil and gas projects during the period of operation of PRRT, from 1 July 1986 (see attachment). Based on our experience with petroleum projects in which Santos has an interest it is our view that PRRT has operated as intended and that therefore the existing design features are appropriate…..
The declining revenues are a function of changes to the industry and currant commodity prices rather than changes or faults in the original design of PRRT.
Santos Limited with a total income of $3.38 billion in 2014-15 declared it had no taxable income in that financial year. The previous financial year its tax liability was $3.14 million on a declared taxable income of $27.34 million out of a total income before tax of $4.35 billion.
BACKGROUND
The Australian, 25 August 2012:
SOME of Australia's biggest oil and gas players expect to pay little or no additional tax on their multi-billion-dollar onshore energy projects, putting federal government hopes of billions of dollars of additional revenue in doubt.
The admissions by Woodside Petroleum, Santos and Origin Energy indicate the government is unlikely to receive any significant additional funds in the foreseeable future from the expanded petroleum resources rent tax.
Parliament of Australia, Corporate Tax Avoidance:
On 2 October 2014 the Senate referred an inquiry into corporate tax avoidance to the Senate Economics References Committee for inquiry and report by the first sitting day in June 2015.
On 15 June 2015, the Senate granted an extension to the committee to report by 13 August 2015. On 12 August 2015, the Senate granted an extension to the committee to report by 30 November 2015. On 23 November 2015, the Committee was granted an extension to report by 26 February 2016. On 22 February 2016, the committee was granted an extension to report on 22 April 2016.
On 2 May 2016, the Senate granted the committee a further extension to report by 30 September 2016.
The inquiry lapsed at the end of the 44th Parliament.
On 11 October 2016, the Senate agreed to the committee's recommendation that this inquiry be re-adopted in the 45th Parliament. The committee is to report by 30 September 2017……
On 1 December 2016, the committee resolved to broaden the scope of the inquiry to include Australia's offshore oil and gas industry.
The committee has asked to receive submissions on the treatment and/or payment of:
i. royalties;
ii. the Petroleum Resource Rent Tax (PRRT);
iii. deductions; and
iv. other taxes
by corporations involved in Australia's offshore oil and gas industry, including matters relating to the collection of these moneys by government.
University Of Technology Sydney, Ross McClure et al, Analysis of Tax Avoidance Strategies of Top Foreign Multinationals Operating in Australia: An Expose, 19 April 2016:
Multinational corporations are in a unique position to engage in tax aggressive strategies, as they are generally large in size and highly profitable, they exhibit low levels of debt in their capital structure, and have operations across national borders that generate foreign income streams. The overall group is made up of multiple entities across a number of tax jurisdictions and most multinational corporations have at least one subsidiary in a tax haven.
These characteristics have been associated with tax shelter activity in the U.S. (Wilson 2009) and with aggressive tax planning strategies such as abusive transfer pricing in Australia (Richardson et al. 2012). The information technology, pharmaceutical and energy sectors are both dominated by large multinational corporations and provide strong mechanisms that allow these corporations to divert profits away from where value and profits are created in order to reduce their tax liabilities.
News.com.au, 17 March 2017:
Gas on the east coast of Australia is controlled by a handful of companies and the lack of competition means they can charge higher prices locally.
At the moment, supply is controlled by six companies: Santos, Exxon, BHP, Origin, Arrow Energy and Shell. Some of these companies also control pipelines used to transport gas around the country, also adding to inflated prices……
He [energy analyst Bruce Robertson] said the global glut of gas, which is predicted to continue until 2030, has also put more pressure on companies to make money domestically.
The more they restrict supply locally, the more money they make.
It’s created the bizarre situation that sees Australian gas being sold in Japan for a wholesale price that is cheaper than the price it’s available for in Australia.
Santos, Shell and Origin Energy have to stick to long-term contracts they signed with Japan amid a global glut, but the lack of competition in Australia means they can restrict supply locally and drive up prices.
Australians are now paying a price higher than the international price for gas.
There’s even talk about Australia importing its own gas back because this would be cheaper.
Australia is also not profiting as much as we could from selling our gas overseas.
Japan reportedly puts a tax on the gas it imports from Australia, which will deliver it $2.9 billion over the next four years.
In comparison, Australia will not receive any money from its petroleum resource rent tax from gas projects over the same period. We get $0 in tax from selling our gas overseas.
Most of the $800 million we do get from the tax every year comes from established oil operations in the Bass Strait, rather than from LNG producers.
No comments:
Post a Comment