As everyday Australians grapple with mounting financial pressures, gas companies are reaping extraordinary profits while contributing minimal tax revenue. This stark contrast has sparked calls for urgent reform, with experts arguing that Australia's natural resources should benefit all citizens, not just corporate interests.
The Case for a Fair Share Levy
Rod Sims, chair of the Superpower Institute, asserts that a fair share levy (FSL) is essential to ensure gas companies pay their fair share of tax. This move would bolster Australia's prosperity and deliver much-needed cost-of-living relief to households. The proposed levy draws inspiration from taxation models successfully implemented in Norway and the United Kingdom, where fossil fuel profits are shared more equitably between governments and corporations.
Current Taxation Shortfalls
Australia currently captures only 27% of fossil fuel profits through a combination of corporate tax, royalties, and the petroleum resource rent tax (PRRT). When measured in cashflow terms, akin to Norway's system, this share drops to a mere 18%. In contrast, other major fossil fuel exporters typically retain between 75% and 90% of profits for public benefit. The PRRT, widely criticized as flawed, has allowed companies to defer payments indefinitely, as noted by Treasury in 2016.
Immediate Benefits for Households
The ongoing crisis in Iran has driven up energy costs, squeezing Australian households and businesses. Simultaneously, gas companies are capitalizing on these high international prices, a situation described as perverse. Implementing a fair share levy could generate significant revenue, with estimates suggesting an additional $1.6 billion since the crisis began. This funding could be redirected to provide immediate cost-of-living relief, easing the burden on struggling families.
Overwhelming Public Support
Research conducted by the Redbridge Group on behalf of the Superpower Institute reveals that 87% of voters agree or strongly agree that Australians deserve a better return from gas exports, with only 3% in opposition. This overwhelming support underscores the public's demand for equitable resource management.
Addressing Industry Concerns
Opponents of the levy, including the gas industry and its supporters, argue that such measures could increase gas prices and deter investment. However, the unique design of the fair share levy mitigates these risks. By sharing in investment costs as well as profits, the model ensures stability and encourages continued development. Norway's experience with a 72% levy rate demonstrates that high taxation does not stifle investment, suggesting Australia could adopt a similar approach without negative consequences.
Long-Term Solutions Over Temporary Fixes
While the Albanese government considers temporary levies in response to the Iran crisis, Sims advocates for a permanent solution. A stable, long-term commitment to the fair share levy would provide investment certainty and address chronic undertaxing. If implemented during peak price periods, such as the Russia-Ukraine war, the levy could have raised $27 billion, nearly 14 times more than the PRRT. These funds could significantly alleviate budget pressures and support households.
Conclusion
Australia's gas resources belong to all citizens, yet largely foreign-owned companies are extracting and exporting these assets while paying some of the lowest taxes globally. As the government faces criticism regardless of its actions, adopting a fair share levy offers a robust, equitable path forward. By ensuring gas companies contribute their fair share, Australia can enhance prosperity, provide cost-of-living relief, and secure a more sustainable future for all.
