While the tax element has reignited for Labor bad political memories of its doomed 2012 mining “super profits” tax, which was repealed by the Abbott government two years later, a group of 28 advocacy organisations led by the Australian Industry Group on Tuesday urged Labor to prioritise a hike in welfare payments to deal with rising energy costs.
The UK government’s plan effectively manages the trade-off of funding increased welfare payments – which will see around eight million low-income households receive £650 ($1128) in two instalments this year, with another eight million pensioners receiving £300 – by giving oil and gas firms an 80 per cent new investment allowance break.
The measure could potentially give the companies a 91p tax saving for every £1 they invest.
Mr Gallagher, who made the unreported remarks at a function last week, indicated that he did not support a tax that was not also accompanied by an investment incentive.
“All that does is give us less money to invest in new projects, so I’m not sure how that helps anything,” he said.
Treasurer Jim Chalmers said on Tuesday that the government is monitoring proposals such as the UK’s but insisted Labor is “not progressing an idea of that nature”.
“If there are steps we need to take on the regulatory side to make sure we are doing what we can to take some sting out of these high energy prices then we will take those steps,” he said.
“But some of those proposals you have seen in the UK and elsewhere are not part of something we are progressing”.
Industry groups and energy companies are carefully watching developments in the UK and Canberra as policymakers scramble to manage a leap in energy costs that threatens to derail household spending and crunch industry.
Among their concerns is the argument that very few Australian gas exporters are enjoying “windfall” profits because only around 10 per cent to 15 per cent of their contracts are settled on the spot market.
There is also anger that nobody was concerned when the industry was losing money during the pandemic and global demand for energy collapsed amid lockdowns.
Australian Petroleum Production and Exploration acting chief executive Damian Dwyer said the industry has announced more than $20 billion in investments in new supply over the past 18 months.
“There are many effective ways to stimulate further investment without the need to raise tax rates – for example investment allowances that are aimed at progressing large-scale capital investment such as the oil and gas industry, mining, renewables, infrastructure and construction – and that would benefit the economy as a whole and increase national income,” he said.
Gas company executives at a Credit Suisse forum in Sydney on Tuesday defended their record as Australian taxpayers.
Mark Hatfield, managing director in Australia for Chevron, which operates the huge Gorgon and Wheatstone LNG ventures in Australia, said while the US major had some years when it paid little tax, it would in future become a “ginormous” taxpayer as it recovered its investment costs.
“Just this year we’re going to be paying a pretty large tax bill – probably about $600 million,” he said, predicting that in coming years that figure would grow “quite a bit”.
Mr Hatfield noted Chevron’s broader contributions, including well-paid employee and contractor jobs and the indirect benefits of local content in its projects.
Woodside Energy executive vice president, marketing and trading, Mark Abbotsford said talk of a potential windfall tax needed to take into account that Australia’s Petroleum Resource Rent Tax already serves that purpose.
“Australia has a PRRT regime already in place, which is intended to address exactly the situation you describe when you have an extended period of time when profits are above a certain rate of return,” Mr Abbotsford said.
“So we need to recognise that is actually the case and if an oil and company is paying PRRT then they are paying 58c in the dollar in tax, that’s already in place.
“And we expect that Scarborough …. will pay PRRT.”
Mr Dwyer, from APPEA, said: “Natural gas has a long-term role in a cleaner energy future and further investment is required to bring more gas to market. This is particularly important to ensure gas continues to make a contribution to Australia’s energy security.”
“APPEA’s focus will continue to be on policy and regulatory frameworks that support Australia as an attractive destination for oil and gas investment.”