The country that collects more from students than from oil companies

Sydney"This is nonsense, it's madness," said Senator David Pocock, "a country that is proud to be on the world podium of gas exporters, and yet we collect more money from students who repay 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 the federal government earned an estimated $4.9 billion (approximately €2.8 billion) from student loan interest during the 2022-2023 fiscal year (€30 billion). "It's shameful, and some of this debate speaks volumes about our priorities," the senator asserted.

The source of the data is a conference 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," said Richard Dennis, "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 telephone company Telstra, with profits similar to those of oil and gas companies, had paid twenty times more taxes. In fact, the government itself acknowledged in the Economic Outlook report published last December that the 2024-25 fiscal year will close with lower revenue than expected due to low oil prices. Thus, beer will generate an additional $1.22 billion in revenue for the Treasury compared to what energy companies will pay for the PRRT, budgeted at $1.4 billion (approximately €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In fact, the PRRT was repealed in 2019 for onshore oil and gas companies, and only applies to offshore operations, as the government wasn't collecting a single dollar from onshore wells.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, a total of 278 billion Australian dollars (166.8 billion euros) has been accumulated.

A bipartisan decision

During 2024, Anthony Albanese's Labor government has sought alliances among Conservatives to reform the PRRT tax, avoiding talks with the Greens and independents like Pocock, who are much more ambitious in changing the system. The reform, which came into effect last July and is supported by 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 by 954% so far this 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 earn and what the Australian government collects"—$20 billion annually (about €12 billion).

Meanwhile, the country's own government launched a 65-page strategic gas plan that doesn't mention the words "fee" or "tax." However, the report on its website is translated into Chinese, Japanese, and Korean, languages that coincide with the main markets for Australian liquefied natural gas (LNG).

The truth is that natural gas production has increased by 366% since 2000. Unfortunately, these huge corporate profits did not translate 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 11 recommendations," laments Kraal, who was one of the participants in the study.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 its 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.