APPEA backs ‘timely’ petroleum tax review

The Australian Petroleum Production & Exploration Association (APPEA) has expressed support for the Federal Government’s decision to review the petroleum tax system in the country.

Treasurer Scott Morrison today launched a review into the design and operation of the petroleum resource rent tax (PRRT), the crude oil excise and associated Commonwealth royalties that apply to the onshore and offshore oil and gas industry.

APPEA chief executive Malcolm Roberts said the review was timely as the industry confronts 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 $5 billion worth of taxes during the same period,” Roberts explained.

“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.”

Source: APPEA
Oil and gas industry profit and taxes paid ($million): 1996-97 to 2014-15. Source: APPEA

 

Roberts said a fact-based review of the Petroleum PRRT 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,” Roberts said.

“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 58 cents in every dollar of profit.”

Roberts said that when projects are not profitable – usually because prices are depressed or upfront costs had not been recovered – the Commonwealth still applied a 30 per cent 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 $200 billion worth of new investment in recent years,” he continued.

“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.”

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