Federal Treasurer Scott Morrison
PERTH (miningweekly.com) – Federal Treasurer Scott Morrison has announced a review into the operation of the Petroleum Resources Rent Tax (PRRT), crude oil excise and associated commonwealth royalties.
The launch of the review comes only days after a report from the Australian National Audit Office revealed that the proponents of the North West Shelf had claimed more than A$5-billion in royalty deductions over an 18-month period.
“The review will advise the government to what extent the tax is operating as it was originally intended, and shall address the reasons for the rapid decline of Australian PRRT revenues. The government will then refer to these findings and recommendations to reform the PRRT,” Morrison said on Wednesday.
“The integrity of Australia’s tax base is paramount. This government is committed to ensuring that Australia’s taxes are working as intended and companies pay the right amount of tax.”
The Treasurer said that the federal government would ensure that the PRRT provided an equitable return to the Australian community from the recovery of petroleum resources without discouraging investment in exploration and development.
The Australian Petroleum Production and Exploration Association (Appea) has welcomed the review, with CEO Dr Malcolm Roberts saying it was timely, as the industry confronted the twin challenges of a dramatic collapse in profits and a sustained fall in the level of exploration undertaken in Australia.
“Appea’s latest financial survey of its members shows that despite the industry recording its first-ever net loss in 2014/15, it paid more than A$5-billion worth of taxes during the same period.
“The continued payment of taxes at a time when the industry is under severe pressure debunks critics’ suggestions that the industry is not somehow paying its way.”
Roberts said a fact-based review of the PRRT by Treasury would show the super profits-based tax was working as intended.
“Much of the debate about PRRT has been characterised by grossly misleading information, distortion and a willingness to ignore the facts.
“For almost 30 years, the commonwealth has used the PRRT as a super profits tax. The tax encourages investment by only taxing projects when upfront costs have been recovered and profits exceed a modest benchmark rate.
“However, when these conditions are met, the PRRT, in conjunction with the company tax regime, applies an effective tax rate of 58c in every dollar of profit.”
Roberts said that when projects were not profitable, usually because prices were depressed or upfront costs have not been recovered, the commonwealth still applies a 30% company tax to revenue.
“Australia’s oil and gas industry is at a crossroads. Exploration has collapsed.
“The PRRT regime that the Labor Party introduced in the 1980s is a major reason why Australia has attracted more than A$200-billion worth of new investment in recent years.
“These new projects will provide taxes, jobs and other benefits for Australia for decades to come.
“Australia deserves a facts-based inquiry by Treasury into the crucial role that oil and gas can continue to play in our energy security – an inquiry that removes the clear bias certain parties hold, not one that is based on fiction and ideological obsessions.”
The review will include submissions from the public, and is expected to be presented to the federal government in April next year.