Australia's Government to Review Oil and Gas Tax Regime
November 29 2016 - 11:23PM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--Australia's government, squeezed by a
rapid decline in oil and gas revenue, will examine its regime for
resources taxes and royalties.
The Petroleum Resource Rent Tax, crude-oil excise and other
federal royalties will be reviewed to ensure companies are paying
the right amount of tax on their activities in the country,
Treasurer Scott Morrison said on Wednesday.
A review team will report back to Prime Minister Malcolm
Turnbull's conservative government by April and its findings and
recommendations will form the basis for reforming the petroleum
tax, Mr. Morrison said.
"We will ensure that the PRRT provides an equitable return to
the Australian community from the recovery of petroleum resources
without discouraging investment in exploration and development that
is vital to the industry," he said.
The launch of the review comes days after the Australian
National Audit Office found errors in the deductions claimed for
the North West Shelf oil and gas venture off the west coast, which
reduced royalties paid by the companies. More than 5 billion
Australian dollars (US$3.7 billion) worth of deductions were
claimed against sales revenue in the 18 months to last December,
some of which it questioned, and A$1.9 billion in royalty was
collected by the federal and Western Australia state governments,
the government agency said in a report released Monday.
Australia is set to leap ahead of Qatar as the world's leading
exporter of liquefied natural gas in the coming years after
international and local energy companies invested about A$200
billion over the last decade building massive production
facilities. But revenue from these projects has been hit the past
two years by the slump in oil and LNG prices, although there has
been a recovery in 2016.
A study released this month by the International Transport
Workers' Federation, an umbrella for about 700 unions around the
world, warned Australia's royalty regime had failed to keep up with
global norms. It found Malaysia's government collected almost three
times the Australian revenue from oil and gas output despite
production being less than 30% above Australian levels, while
Indonesia's revenue was more than double Australia's while
production was about 50% higher.
Mr. Morrison said the integrity of Australia's tax base was
paramount, and the review was aimed at advising on whether taxes
and royalties were operating as intended and would draw on
international experience.
Money collected through Canberra's PRRT--which is applied to a
project's profits, rather than production volumes--has halved to
about A$800 million since the 2013 financial year and crude-oil
excise has also declined by more than half, Mr. Morrison said
Wednesday. There have been no changes to the tax since 2012.
Woodside Petroleum Ltd., which operates the North West Shelf
project and is Australia's biggest independent oil and gas company,
said it would cooperate fully with the review.
"The oil and gas industry is under significant financial
pressure from low commodity prices, therefore stability in tax
arrangements is essential for our shareholders to support
investment in uncertain business environments," the company said in
a statement.
Canberra has for almost 30 years used PRRT as a "super profits"
tax, encouraging investment by only taxing projects when upfront
costs had been recovered and profit exceeded a benchmark rate, said
Malcolm Roberts, chief executive of the Australian Petroleum
Production & Exploration Association, which represents the
country's oil and gas industry.
"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," he said. "When projects are not
profitable, usually because prices are depressed or upfront costs
have not been recovered, the commonwealth still applies a 30%
company tax to revenue."
The Australian energy industry paid more than A$5 billion in
taxes during the 2014-15 year despite recorded a collective net
loss for the year, the association calculated.
Speaking at an event hosted by the American Chamber of Commerce
in Australia, Richard Owen, chairman of Exxon Mobil Corp.'s
Australian business, said the review offers another opportunity to
talk about the economic contributions of the company's Bass Strait
operation off southern Australia.
- Mike Cherney in Sydney contributed to this article.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
November 30, 2016 00:08 ET (05:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From Apr 2024 to May 2024
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From May 2023 to May 2024