The Queensland Government has increased the rate of royalty taxes on petroleum by 25 per cent as part of its 2019 state budget.
Royalty taxes on petroleum, which includes liquified natural gas, have risen from 10 per cent to 12.5 per cent for all gas produced in Queensland, effective as of July 1.
The decision has brought widespread criticism from industry bodies, with the Australian Petroleum Production and Exploration Association (APPEA) saying there was no justification for the decision.
“The Treasurer has unfortunately determined to use the blunt instrument of tax increases rather than promoting investment and growth to increase long term revenues,” APPEA chief executive Andrew McConville said.
He emphasised the budget revealed the importance of the natural gas sector to the Queensland economy, which is forecasted to deliver over $2.5 billion in royalties to the state’s citizens over the next four years.
“Increases in royalty rates, however structured, increase the cost of gas production and undermine the long-term stability that is needed to continue to attract investment in Queensland,” McConville said.
“An announcement with no consultation, as we have seen today, will be very carefully reviewed by current and prospective investors.”
The Queensland Resources Council (QRC) reciprocated concerns about what effect the decision by the Palaszczuk Government will have on the industry.
“Premier Annastacia Palaszczuk and Treasurer Jackie Trad have broken a promise and broken their word to regional Queenslanders,” QRC chief executive Ian Macfarlane said.
“Regional Queenslanders will be at a loss to understand how they can trust a government that says one thing one week, and something completely different the next.”
MacFarlane pointed out the flow-on effect the decision will have on the wider industry, including reduced competitiveness of Queensland gas and placing jobs and future investment at risk.
He added the tax hike will also make lower emission energy generated from gas more expensive and increase the cost of gas to manufacturers such as Incitec Pivot in Brisbane.
“To make matters worse, Queensland is the only state on the East Coast that is developing its gas resources. This tax hike risks the gas supply for all Australians, not only Queenslanders, given Queensland gas suppliers have been doing all the heavy lifting for the gas market,” Macfarlane concluded.