Angry about the sudden, astronomical rise in the cost of Australian gas? You should be.
Not only does it directly affect household budgets and increase costs for local businesses, but it is also an important factor contributing to the recent rise in electricity prices.
Normally, it would be a little comforting to know that our hard-earned money went to a good home, where it was at least used to build a future for the next generation.
It is very possible that this is the case. Unfortunately, this house is not here.
Most of the extraordinary profits made at this time, courtesy of Vladimir Putin’s invasion of Ukraine, are being expelled from the country because Australia’s oil and gas resources are being overwhelmingly exploited by global multinationals. .
In fact, there is almost no local involvement.
According to a new study by The Australia Institute, Australians own only 4.3% of the companies that extract and process natural gas across the country, from the northwestern platform, inland, to the Bass Strait and North Queensland.
Given the large amounts of capital needed to extract, process and export oil and gas, large energy multinationals are expected to be at the forefront of the development of these large projects.
The tragedy, however, is that not only is there a minimum ownership of Australia involved, which means that most dividends flow abroad, but most of these corporations do not pay taxes.
Most have never paid any taxes and in some cases have made it clear that they will never do so.
Despite promising billions of dollars in tax revenue and royalties while seeking regulatory approval, a combination of accommodative tax regimes on our part and tax evasion strategies have allowed them to reap huge profits in recent years without bring almost nothing to the nation.
Source: Department of Industry, Science, Energy and Resources
The non-fiscal regime
In 2015, US oil giant Chevron calculated that it would make large annual contributions to Australia’s tax base as the rate of expansion of its oil and gas fields on the north coast of Western Australia increased. .
This never happened. In two years, he had suffered a humiliating defeat in the Federal Court after the Australian Tax Office exposed what had been one of the oldest tricks in the tax avoidance manual.
The U.S. parent company was borrowing money, about 2 per cent, and lent it to the Australian subsidiary at around 9 per cent, making sure all profits from the local business were shuffled out of the country.
His most recent accounts show that he has not yet paid a penny in corporation tax.
When it comes to paying taxes, or rather not paying, it’s not the only thing.
Shell, which has large stakes in most of the major new LNG fields in Western Australia, along with the absolute ownership of one of the three major export facilities on the Gladstone coast in Queensland, has not paid any tax on income since 2015.
In fact, an analysis of the ATO database shows that five of the largest operators in the gas industry have not paid any income tax for the past seven years.
As part of its investigation into Chevron, the tax office found that in the previous four years, the loans from the headquarters of major oil multinationals to its Australian subsidiaries, basically loans to themselves, were ‘had doubled from $ 52 billion to $ 107 billion.
Over the past seven years, the world’s largest resource companies have earned about $ 138 billion in revenue here without paying a penny in corporate income tax, which led to an urgent overhaul of the way we tax multinationals.
These calls have largely reached deaf ears.
However, criticism of East Coast gas shortages in recent months, which has seen East Coast gas exporters charging a 900 percent premium to West Coast prices, is likely to moreover, put the focus of the tax regime.
Resources are growing but rents are falling
For more than 30 years, we have had a special tax on oil and gas companies, called the income tax on oil resources. It was a bit like the Miner Tax, albeit a much earlier incarnation.
The tax only starts during the production phase and is supposed to capture a portion of the profits from major developments. Somehow, despite rising gas exports over the past decade, it has consistently generated less revenue than it did 20 years ago.
Even with the recent rise in prices, this year they are likely to raise only $ 2.4 billion, about $ 1 billion more than expected last December, but still at or below the turn of the century.
Shell has not paid income tax since 2015. (AAP: Julian Smith)
Not surprisingly, Chevron and other major oil and gas players have argued that it should remain as it is.
“The PRRT works the way it was designed,” the company said in a presentation to the federal government in 2017.
“It has contributed to large investments in Australia by Chevron and others and can prop up a new wave of oil and gas investment.”
That may be true. However, given that recent Chevron accounts indicate that between 2015 and 2020 it had not paid any tax under the scheme, what benefit does Australia derive from this investment?
Chevron’s joint venture partner on the large Gorgon project off the coast of Western Australia, Shell, took it a step further last year.
He told investors he believed he would never pay any taxes under the PRRT as he had accumulated enough losses to offset future payments.
It’s not like we’re warned.
In his 2010 review of the tax system, former Treasury Secretary Ken Henry said the PRRT “does not collect an adequate and steady share of resource income” because it compensates investors in deductions.
Gifts suitable for a poor person
When it comes to paying taxes, large resource houses almost always cite the amount they pay in royalties.
But copyright is not taxed.
They are a cost of doing business. Just as musicians earn a royalty to allow others to sell their recordings for a profit, Australians, or rather the states that make up the Commonwealth, own the resources. The miners have to buy them for us.
Even so, owning one is still beyond the reach of the average person.
Over the past decade, Australia has occasionally surpassed Qatar as the world’s largest exporter of liquefied natural gas.
However, where Qatar has managed to get an unprecedented financial benefit from royalty payments on its exports, we have barely managed to pull the change.
Five years ago, the Treasury estimated that we would receive about $ 800 million in copyright for 100 billion cubic meters of LNG.
Instead, Qatar was expected to get $ 26.6 billion for exactly the same amount. This is mainly because it charges a 35 percent royalty on its gas.
Gas that fires foreign coffers
While there are some local companies that play a key role in the gas industry, this has done very little to reduce foreign ownership in the sector.
This is because Woodside, Santos and Origin are public companies that attract high levels of foreign investment.
A study by The Australia Institute to be published today shows that Woodside is 82.2% foreign-owned and Santos 71.1%.
Of the 10 major LNG projects, three were 100% overseas controlled, including the largest, Gorgon.
Seven of the 10 were more than 90% foreign-owned, while the three Queensland-based operations that have created so much distress over the past five years range from 89% to 100% foreign-owned.
Fifteen days ago, Origin Energy estimated that rising gas prices would add $ 300 million in additional gains this year from its 27.5 percent stake.
This is multiplied by an additional $ 1.1 billion for this project.
The other two are likely to have similar unexpected gains, some of which come from East Coast businesses and households, most of which pay their share of Australian taxes.
Two decades ago, then-Treasurer Peter Costello blocked Shell from a Woodside takeover, arguing that a foreign takeover of the Northwest platform was against the national interest.
It has happened anyway.
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Posted 6 hours, 6 hours ago, Sunday, June 12, 2022 at 7:53 PM, last updated 1 hour, 1 hour ago, Monday, June 13, 2022 at 12:01 AM