Treasurer Rejects Green’s Call to Double Offshore Gas Tax

Australian Treasurer Jim Chalmers speaks to the media during a press conference to announce the newly appointed RBA governor at Parliament House in Canberra, Australia, on July 14, 2023. AAP Image/Lukas Coch

Australian Treasurer Jim Chalmers has rejected the crossbench’s offer to support the government’s petroleum resource rent tax (PRRT) reform if they agreed to more than double the tax revenue.

The tax changes, which were announced in the budget, will limit deductible expenses to 90 percent. This is expected to raise $2.4 billion (US$1.61 billion) from offshore LNG (liquified natural gas) companies.

But the government intends to gain the support of the Coalition to pass the legislation, rather than the Greens and independents Jacqui Lambie, Tammy Tyrrell, and David Pocock, who want the cap to be reduced further down to 80 percent.

“We intend to legislate the changes to the PRRT that we announced in the budget. They came after a considered methodical and long process, which landed on our three options from the Treasury,” Mr. Chalmers told reporters in Canberra.

“We chose the Treasury recommendation that provided the most return sooner when it comes to offshore LNG, and that’s the design; that’s the policy that we intend to legislate.”

Mr. Chalmers encouraged the Coalition to vote for the proposal as soon as possible so the government could gain more revenue from the LNG industry for other public expenses.

“This does put pressure on the Coalition, in particular, to vote for our plan to get more revenue sooner from offshore LNG to help fund priorities like Medicare and bulk billing or this cost‑of‑living help that we’re rolling out,” he said.

Mr. Chalmers told Parliament on Monday that these changes were the “best way” to ensure the offshore LNG industry “pays more tax sooner” without damaging international relationships and jobs while also recognising the role gas will play in Australia’s transition to net zero.

Japan and South Korea would be particularly affected, as both countries have made significant investments in Australia’s offshore LNG industry.

Ichthys LNG, located in Western Australia’s Browse Basin, is the biggest single operation for Japan’s largest petroleum and exploration company. While Prelude, a joint venture between Shell and South Korea, is the world’s largest floating LNG vessel. It is also based in the Browse Basin.

A tanker heads out to the channel in Rochester, England, ahead of the first gas shipment of LNG from Australia to Europe in more than half a decade, on Aug 22, 2022. Dan Kitwood/Getty Images

Earlier in May, Liberal leader Peter Dutton said the Coalition was willing to support the tax if Labor introduced regulations to reduce red tape and ensure companies did not pass on the costs to consumers.

“What we’re arguing is that there should be a quid pro quo and that we should be offering some support to the industry so that we can get more gas into the system,” he said.

“If we have more supply, it will help to reduce prices.”

Gas Industry the Villain for Crossbench

It comes after the crossbench wrote to Mr. Chalmers, offering to vote for the legislation if the deductions cap was further reduced, which would bring in another $2.6 billion in revenue.

In a letter to Mr. Chalmers on Monday, Greens Senator Nick McKim, with the support of the independents, argued that gas companies would contribute “so little” under its current PRRT reforms.

“We will not support the government’s PRRT changes as currently presented,” Mr. McKim wrote, reported The Australian. “That gas companies will contribute so little while so many in the country are enduring a cost-of-living crisis represents an unacceptable missed opportunity.”

But this was only a starting point for the Greens, he said, warning that they would push for more changes so the government would receive more tax from the LNG industry, which he accused of being the “primary cause of the climate crisis.”

Labor had a choice between the crossbench offer or “settling” with its current proposal of less revenue and weaker environmental approvals, Mr. Kim said, adding that the ball was in Mr. Chalmers’s court.

In May, Greens leader Adam Bandt called the government’s cooperation with the Liberals to pass this tax a “dirty deal.”

“Labor’s changes let gas corporations get away with paying next to nothing and robbing the country of its fair share. Labor’s tax was co-written with the gas corporations, so no wonder the big fossil fuel giants are begging Labor and the Liberals to get it passed,” he said.