Is Australia getting its fair share of gas revenues? Many Australians certainly don’t think so and if the Australian Taxation Office’s data is any indication, they may have a point.
A quick search of the data throws out some apparent shockers.
During the 2020/21 financial year, Woodside Energy recorded $6.7bn in revenue and yet only $157m of it was considered taxable income while paying exactly zero corporate taxes. Santos and its subsidiaries generated nearly $4.8bn, taxable income of just $68.8m and about $17,299 in taxes paid.
The latter’s results might be explained in part by having to struggle with an accounting loss of $306m during the entirety of 2020.
AGL had $10.4bn in revenue and paid no tax while Chevron Australia probably takes the cake with its three entities recording combined income of $12.5bn, $113m in taxable income and paid… $30 in tax.
Companies do have options to reduce their taxes by deducting expenses and depreciating their admittedly expensive capital investments, but some of the figures certainly look suspect at first glance.
A couple of disclaimers have to be made at this point. Firstly, we might have missed a subsidiary or two and secondly, oil prices (and other energy prices) weren’t anywhere close to the levels we are seeing now for much of that period due to the impact of COVID on the economy.
Woodside at least was quick to point out that while Woodside Petroleum paid no corporate tax, its two 90% entities Burrup Facilities Company Pty Ltd and Burrup Train 1 Pty Ltd, paid nearly $390m in taxes. Adding royalties to the mix takes this up to $658m for the whole of 2021.
The North West Shelf operator also noted that this amount would be significantly higher this year (thanks no doubt to high energy prices), pointing out that it had already paid more than $2bn in taxes and royalties from January to October this year.
Interestingly, Chevron had previously predicted that it would begin paying income taxes by the mid-2020s (due to deductions related to the construction of its giant Gorgon and Wheatstone LNG projects) and were quick to point to a modest $149m income tax payment for the period from 1 January 2021 to 31 December 2021 while forecasting a far healthier $3.7bn payment for this year.
On a somewhat separate note, Santos’ three entities paid $198m through the Petroleum Resource Rent Tax (out of a grand total of almost $926m).
Judging the judges on taxation
While the numbers in the ATO’s 2020/21 data seem damning at first sight – as has been picked up on by many others, the impact of COVID largely made for some difficult times for energy companies during that period.
To use those figures as justification that oil and gas companies are not paying their taxes seems just a little disingenuous and just enough for us to give them a bit of latitude.
However, the real drama might come from the PRRT which from the 2017 financial year has yielded anywhere between $881m to $1.16bn (in the 2018 financial year) in additional tax revenue.
Given that the PRRT is supposed to be levied at a rate of 40% on taxable profits generated from petroleum products produced by offshore projects, the numbers do seem bare (based on what data we have available) and lend some credence to calls to strengthen the profits tax and/or introduce a further windfall tax.
West to east gas drama returns
Meanwhile, New South Wales Treasurer Matt Kean’s call for the establishment of a national gas policy that would force Western Australia to send its reserved gas to the east has been met by derision and rightly so.
WA Premier Mark McGowan was scathing in his reply, saying that WA “shouldn’t and won’t be punished for getting it right from the start” – a reference to the state’s domestic gas reservation policy that has made it the envy of eastern states. He added that NSW should actually do some hard work and stop blaming others for its failures.
Ouch.
It doesn’t take much to uncover why Kean’s plan is unfeasible to say the least.
Even if such a plan were implemented, the actual logistics of getting the gas from WA to the east are daunting.
One of the oft-mentioned options – an intercontinental pipeline – was found by ACIL Allen to be unsuitable due to the years required to complete necessary planning, approvals, route acquisition, commercial agreements and more as well as the large capital investment of some $5bn. That’s a sum that’s likely to have increase since then.
Shipping the gas over as LNG also runs into the simple problem of NSW not having any regasification facilities – and building them will again take time and cost money.
Maybe time to end that moratorium on gas drilling instead?