The country that raises more money from students than from oil companies

Sydney"This is nonsense, it's madness," Senator David Pocock asserted. "A country that's proud to be among the world's largest gas exporters, and yet we collect more money from students repaying their loans than from companies with the Petroleum Resource Rent Tax (PRRT)."

A former rugby captain and now a senator representing a progressive constituency, Pocock criticizes the fact that, during the 2022-2023 fiscal year, the federal government earned approximately $4.9 billion (approximately €2.8 billion) from interest on student loans (300 million euros). "It's shameful, and some of that debate speaks volumes about our priorities," the senator explained.

The source of the data is a lecture at the National Press Club by the director of The Australian Institute, a progressive think tank dedicated to public policy research. "Norway taxes the fossil fuel industry and guarantees free university education," Richard Dennis stated, "while in Australia we subsidize fossil fuels and charge our children a fortune to go to university."

Meanwhile, the Institute for Energy Economics and Financial Analysis found that, between 2016 and 2017, the telecommunications company Telstra, which had profits similar to those of oil and gas companies, had paid twenty times more tax. In fact, the government itself acknowledged, in the Economic Outlook report published in December, that the 2024-2025 fiscal year will close with less revenue than expected due to low oil prices. Thus, beer will bring in $1.22 billion more to the Treasury than the energy companies will pay for the PRRT, budgeted at $1.4 billion (about €840 million).

Diane Kraal, an expert in Australian taxation and public policy at Monash University, points out that the PRRT was designed to capture the huge profits from oil, rather than gas—an industry with high production costs—because it allows for deductible expenses before the tax is levied. "It's an inappropriate system. And despite having been amended several times, most recently to change the system underpinning the PRRT, the measures don't go far enough and have proven ineffective."

In fact, the PRRT was repealed in 2019 for onshore oil and gas companies, and only applies to offshore operations, as the government wasn't collecting a single dollar from onshore wells. Kraal points out that since the capital and operating costs of a facility are deductible, 278 billion Australian dollars (166.8 billion euros) have accrued: "That means you have to achieve 278 billion in revenue before the companies that operate on LNG in peace."

A bipartisan decision

During 2024, Anthony Albanese's Labor government has sought alliances among Conservatives to reform the PRRT tax, aiming to avoid colluding with Greens and independents like Pocock, who are much more ambitious in changing the system. The reform, which came into effect last July and has the support of employers, reduces the proportion of income that can be offset by deductions by 90%. However, the system only taxes profits once production or investment costs have been recovered, leading companies to claim annual deductions that virtually exempt them from paying the tax.

According to the International Energy Agency, 72.2% of Australian gas was exported in 2023, a trend that had grown by954% since the beginning of the century. "In 2022, profits reached $90 billion, and now they're back to around $69 billion. But in terms of taxes, we're talking about the government expecting to collect $1.4 billion. There's a huge disparity between what producers get and what the Australian government collects," he said. It collects $20 billion annually (about €12 billion).

Meanwhile, the country's own government launched a strategic gas plan that, in 65 pages, does not mention the words rate either taxOn the website, however, the report is translated into Chinese, Japanese, and Korean, languages that align with Australia's main liquefied natural gas (LNG) markets.

The truth is that natural gas production has increased by 366% since 2000. Unfortunately, these huge corporate profits have not translated into increased revenue for the federal government, which in 2016 forced Conservative Prime Minister Scott Morrison to commission an independent report from economist Michael Callaghan. "They only accepted five of the eleven recommendations," laments Kraal, who was one of the participants in the Callaghan report.

For its part, the Australian National Energy Producers (ANEP) pushed in 2023 not to reform the system, calling for a bipartisan agreement to "provide security for future investment," in a statement signed by Chief Executive Samantha McCulloch. Threats to reduce investment are constant, but academics emphasize that Australia is a politically stable country, the world's seventh-largest producer in 2021, when it surpassed Qatar in exports for the first time. "They've always threatened to leave the country, but we are one of the most stable countries to invest in," Kraal asserts.

"The gas and oil lobby is very powerful, that's why we have very lax taxation," says Kraal, who advocates returning to a system based on royalties that taxes the value of the product, not corporate profits. There are elections this year, and if, as the polls suggest, Labour loses its majority, they will have to seek alliances with the Greens and independents, like Pocock, who will put the PRRT on the table.