Is it fair that Australians pay more tax on one beer than the oil and gas industry pays in petroleum tax on offshore gas in a year? Might a 10% royalty guaranteeing annual revenue of between $1.3 billion and $2.8 billion be a better way to go? These are the issues rightly raised by a report just out by the McKell Institute called ‘Harnessing the Boom.’ It was written by Richard Holden, a Professor of Economics at UNSW Business School. There are some great resources on a campaign site over this issue here. One of our colleagues at Tax Justice Network Australia Jason Ward takes up the story for us here:
The Tax Justice Network Australia (TJN-Aus) has had major wins in getting the Australian government to tackle corporate tax dodging. Currently TJN-Aus is running a campaign to push the government to reform the primary tax on oil and gas production, the Petroleum Rent Resource Tax (PRRT).
The current boom in exports of liquified natural gas (LNG) will catapult Australia over Qatar as the world’s largest exporter. However, on the same volume in 2019/20 Qatar will generate over $26 billion in royalties will Australia will earn nothing in PRRT from LNG. Qatar will also earn significantly more revenue from dividends from state-owned companies and corporate income tax payments.
From Michael West, an Australian tax journalist:
“In Australia, Part 4a of the Tax Act deems that the principal purpose of a transaction should be commercial (rather than tax driven). In light of the proliferation of tax haven activities by Australian companies this law, Part 4a, must be the most highly disregarded and disobeyed law in the nation, perhaps only topped by traffic offences.”
It’s an interesting story, not least because it has unearthed a hard-to-get number that we haven’t, from memory, seen before:
“The IPO documents for Intertrust estimate in 2014 the “total value of the global trust and corporate services market … was estimated at approximately €5.6 billion in revenue.”
In March The Economist magazine rang alarm bells (again) about a rise in concentrated market power: a problem where the biggest firms get ever bigger and more like monopolies, making it easy to extract wealth from the rest of us (as opposed to creating wealth.) This, in turn fosters steeper inequality and poverty and reduces economic growth. As they put it:
“High profits across a whole economy can be a sign of sickness. They can signal the existence of firms more adept at siphoning wealth off than creating it afresh, such as those that exploit monopolies. If companies capture more profits than they can spend, it can lead to a shortfall of demand.”
The Australian Senate has just passed the Bill that will tie Australia into the new global system of tax authorities sharing information with each other automatically. Unfortunately, this system, set up through the OECD, currently had not allowed full participation by developing countries.
With help from international colleagues, TJN’s Andres Knobel and Joe Stead, we were able to get Labor party support for an amendment to the Bill that will require de-identified aggregated information about accounts held in Australia to be published each year by the Australian Tax Office (ATO.)