30 November 2023
That all words after "acknowledging" be omitted with a view to substituting the following words:
"the role of gas companies in influencing the drafting of this bill, the House declines to give the bill a second reading as it is of the opinion that:
(1) the bill should:
(a) adopt an 80 per cent deductions cap for the Petroleum Resource Rent Tax, lowered from the current 90 per cent, which would double the amount of revenue subject to the 40 per cent Petroleum Resource Rent Tax for that year and remain consistent with Treasury advice provided to the Government; and
(b) abolish the seven-year exemption to the deductions cap which supports the development of new oil and gas projects and is contrary to the Government's claim to be committed to the Paris Agreement and keeping global warming below two degrees; and
(2) the Government must stop presenting omnibus bills of this nature to the House combining complex, disparate policy issues that require greater interrogation and consideration than is currently allowed for whilst also undermining the Government's own credibility to present a clear, coherent policy programme".
Yet again we see the government put forward an omnibus bill intended to divert attention, wedge non-government members of this House and avoid scrutiny and accountability. The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 outlines very necessary reform in response to the PwC scandal, but it piggybacks in that legislation a very sneaky attempt at also bringing in the changes to the PRRT, the petroleum resource rent tax, which needs to be much stronger. The government knows that by piggybacking these two very disparate topics in one piece of legislation, we are left with the question: do you support something that is not good enough or do you take a stance against it?
The amendments that I am proposing attempt to deal with that. It's completely unacceptable for confidential government tax information to be used by advisory firms to design and promote a scheme to avoid the very tax upon which they are advising. That was the PwC scandal, and there's no doubt that the Australian people and the residents of Warringah absolutely want us in this place do something about it. Responding swiftly to introduce reforms that increase penalties for such behaviours and broaden definitions to capture such schemes and practices have widespread support.
Schedules 1 to 4 of this bill do the following: they increase tax promoter penalties, allow more time for the ATO to take civil penalty proceedings in the Federal Court and expand application of tax promoter penalty laws. They extend whistleblower protections for those who make disclosures to the Tax Practitioners Board, boost the TPB's investigative powers, and allow the sharing of protected tax information between the Tax Practitioners Board and Treasury about suspected breaches of confidence by tax intermediaries engaging with the Commonwealth.
I welcome these reforms and note that the Senate, two weeks ago, passed further changes relating to membership of the Tax Practitioners Board. In fact, so sensible are these amendments that I'd imagine nearly every member of this House would support them, as would every Australian taxpayer who expects corporations to pay their fair share of taxes, just like they do. It's very important that the whole consultancy area is cleaned up. Having spoken in this House and strongly advocated for whistleblower protections, the provisions supporting whistleblower protections in this legislation are also very welcome. These are good reforms, and I really, really want to support them.
However, schedule 5 of this bill is an absolute disgrace. It sneaks in reform on a very different issue—how these two things can genuinely be put in the same piece of legislation is farcical—the petroleum resource rent tax, or PRRT as it's known. This is the key issue I want to talk about today. The PRRT is a tax that is meant to deliver to the Australian people money to our economy—it is rental payments for our gas resources—but it doesn't deliver much. The government would like a pat on the back for saying that they're delivering reform in this area, but what they are doing is the bare minimum and really only bringing forward revenue. It's so poorly designed that it effectively allows multinational companies reaping super profits from gas reserves to pay less than one per cent.
Schedule 5 of this bill caps deductions for LNG projects such that the LNG entity will be taken to have a taxable profit of 10 per cent of the assessable receipts derived in a year with tax being payable on this amount. The effect of the cap will be to bring forward PRRT collections for gas projects, but it won't bring in any more revenue to the government. It is a bait and switch. The PRRT, even with the government's proposed reforms in this omnibus bill, is the most lax resource rent tax system in the world—I repeat: the most lax resource rent tax system in the world—at a time of cost-of-living crisis and record profits in the gas industry.
Its failures have been highlighted in recent years, as gas companies have reaped windfall profits yet many projects have not paid any resource tax. Australia has one of the weakest resource tax regimes in the world, and you only have to listen to members of the coalition and the previous speaker to understand just why it is so weak. The blinkers that have been on in relation to this sector are quite amazing, and it has cost the Australian people.
We have one of the most generous tax regimes in relation to oil and gas companies. In contrast, Norway's resource tax system taxes 78 per cent of export profits, delivering a $2 trillion sovereign wealth fund to their economy, supporting healthcare, childcare and social measures, all without discouraging investment. You'll hear a lot of fearmongering about the effect, but the reality is that it's time for the open access, the free run, to end.
In 2023 it's estimated that oil and gas export taxes will deliver some A$145 billion to the Norwegian economy, the equivalent of a staggering $107,000 per family. In comparison, Australia is nowhere. The amendments to the PRRT introduced in this omnibus bill, while being framed as delivering more to Australians, do so very little at a time where so much more is needed. They do limit the amount of deductions that can be applied to determine the PRRT payable, and they do therefore bring forward, but not increase, money payable on that 10 per cent.
This reform brings forward $2.4 billion over the next four years, equating to some $600 million per year. This amount is trivial in comparison to the super profits that have been generated by gas companies in recent years. The government's rhetoric will seek to have Australians believe that this is good policy, and the coalition will make you think that somehow this is terribly unfair on the gas companies. The reality is that this is unfair on the Australian people.
The PRRT is meant to strike a balance of supporting Australia's revenue base by providing an equitable return to Australians from the extraction and sale of oil and gas without discouraging investment. In reality it establishes Australia as one of the most favourable jurisdictions for oil and gas companies. Many projects avoid paying PRRT year after year, often allowing companies to take gas from Australia for effectively nothing. It provides too much support, allowing favourable deduction strategies and incentives—and the deductions increase in value over time.
On the rare occasion PRRT is paid, it is then a deductible expense from the income tax of a company. That is why I wrote to the government during the consultation on the PRRT this year, proposing—and I put this forward in my motion today—that we should do two very important things: we must adopt an 80 per cent deductions cap, down from the current 90 per cent cap; and we must abolish the seven-year exemption to the deductions cap which supports the development of new oil and gas projects. Imagine if the Australian people had the benefit of a seven-year exemption before tax was payable for them. I mean, the audacity is just staggering.
Altering the deductions cap would double the amount of revenue subject to the 40 per cent petroleum resource rent tax for that year and would remain consistent with Treasury advice provided to the government. Having a lower deduction cap at 80 per cent would not negatively impact gas companies, contrary to the dire picture painted by coalition members. Even Treasury advised that the cap could be set lower. In fact their recommendation was a range, and the government elected the weakest element of the range—at 80 per cent—included in Treasury's recommendation. This was revealed under a Senate order. It was not something forthcoming from Treasury.
Tony Wood at the Grattan Institute, Jason Ward from the Centre for International Corporate Tax Accountability and Research, together with the Tax and Transfer Policy Institute, the Australia Institute and an ongoing list of supporters for broader reforms to be adopted for the PRRT—everyone came out, quite stunned, at how generous the government's proposal was. Well, I should say everyone except the gas companies. They of course welcomed it and talked about it as being fair. The former chair of the ACCC, Rod Sims, stated that it could have been three times more valuable to the Australian people, delivering some $21 billion to Australians, with a 66 per cent cap, but the government chose to adopt a 90 per cent cap, helping out gas companies and denying Australians their fair share of revenue.
This brings me to the exemptions for new gas projects, which effectively give new gas projects a 'Get Out of PPRT Free' card, with a seven-year exemption to help them recover their capital costs of establishing and drilling new oil deposits off our pristine coastline and on our beautiful land. For example, for the people of Warringah on our coast, if PEP-11 goes ahead off the coastline of New South Wales, that project will get a seven-year exemption from this cap on deductions. As I note in my private member's bill to end PEP-11—which I sincerely hope the government will support—there is just no return to the Australian people for these projects. This seven-year exemption is contrary to the government's claim to be committed to the Paris Agreement and keeping global warming below two degrees.
We know that we have huge costs ahead in meeting the increased impacts of global warming. It is going to cost the Australian people in their cost of living, in their insurance premiums, and in their safety and security; and yet, when the opportunity is there to recover the revenue for the Australian people to meet those costs from the culprits—the industries that are making this problem worse—we see a meek and small response; we see kowtowing to the gas industry.
The world is on fire. We know we are in a global boiling situation. We are meeting thresholds. We are hitting records all the time. We're in for a brutally hot summer here in Australia. We have seen records dropping in Europe nonstop. We've seen a catastrophic failure of Antarctic ice to form over the winter. Scientists are pondering what the implications of that are going to be. There are grave concerns about that. In fact, today we'll see the annual climate statement delivered in the House, which will, I hope, paint the true picture of the challenge ahead for Australia.
I know that many small and medium-sized Australian business owners are crying out for the kind of support that the PRRT provides to big oil and gas companies. Imagine if a small SME got seven years before it had to deal with any kind of revenue or profit tax. Wouldn't it be nice for a small SME to get that kind of free ride in the system?
Many Australians are ropeable at the level of support Australia's huge multinational businesses that pay little company tax are afforded—and rightly so. How is it that we design a scheme to support huge multinational companies that take our resources, give us no corporate tax, and then pay little to no resource rent tax in return? It begs the question: why on earth are we giving the same level of support to small business? Reform to the PRRT is significant, and it must be tackled, but it is so significant that it should have its own legislation. It should not be piggybacked on legislation around consultants. Yet the government has tried to sneak in with its universally welcomed PwC integrity reforms to avoid scrutiny.
This bill does not go far enough. It seeks to perpetuate disproportionate and grossly inappropriate support for the gas industry. It is a lost opportunity for greater reform that would deliver more to the Australian people for health care, transport, child care, education, NDIS and ageing. We have so many challenges and so many demands on the budget. Proper scrutiny is warranted. I hope the Senate will not allow such a significant opportunity to bring billions of dollars to the Australian economy to slip on past without a real fight.
I have to say that, this being my second term in this place, the approach the government has taken on this is deeply disappointing. For a party that, in opposition, talked a big game on integrity, on good legislation, on taking to the election a promise around multinational tax reform, to do so now in such a sneaky way and such a weak way is deeply, deeply disappointing.
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