In October 2022, Daniel Bleakley at the Australia Institute wrote this eye-opening article. With a budget looming, this article seems even more relevant given how difficult it is to find the money to fund everything that Labor needs to do.
Previous governments are to blame for this sad state of affairs. Only Labor can do anything about it now – and it needs to do something ASAP.
First, the article:
“Norway shows how Australia can get a fair return from oil and gas
Australia’s and Norway’s economies both have massively profitable resource industries, but Norwegians receive a much larger and fairer share
Norway and Australia are both relatively small, developed countries whose economies are dominated by natural resource extraction. In recent years the Norwegian and Australian oil and gas industries have generated similar amounts of revenue. However, the two nations’ approach to resource taxation has had vastly different outcomes over the past three decades.
Since 1996 Norway has been taxing the profits of its oil and gas sector at 78%. This is comprised of Norway’s 22% corporate rate as well as a 56% “Special Tax” (petroleum tax).
Australia meanwhile has a petroleum tax (PRRT) but it is much less effective. The PRRT, unlike Norway’s Special Tax, is deductible from corporate tax, and is calculated when it satisfies the definition of a “marketable petroleum commodity”. This means that the PRRT calculation for LNG can be applied before the major value-adding liquefaction process and thus reduces the amount that is considered taxable compared to Norway.
Norway’s Government Pension Fund Act also stipulates that the Government’s entire net cash flow from the petroleum industry shall be transferred to the Fund. The first transfer was made in 1996 and the fund is now worth A$1.9 trillion. This is around $350,000 for each of Norway’s 5.4 million citizens or $1.4 million for a family of four.
Norway’s Ministry of Finance projects that tax revenue from oil and gas will be a staggering A$127 billion or around $23,500 per Norwegian citizen in 2023 alone.
In stark contrast, Australia’s oil and gas industry received billions of dollars worth of taxpayer-funded subsidies and the huge surge in revenue to the industry has not resulted in a similar jump in tax revenue.
With Australia’s oil and gas companies making windfall profits due to the invasion of Ukraine, the Australian government needs to urgently change how the industry is taxed to ensure Australians get a fair share of the returns from our resources.”
We took this article one step further and analysed the raw numbers – they are alarming!
Here’s the summary. Over 32 years, Australia’s oil and gas revenue was a whopping $811.3 billion.
Disappointingly, only 19.9% of that found its way into government coffers. Just $161 billion or just $5 billion per year!
Norway on the other hand, with its tighter tax laws, managed to collar 57.2% of its industry revenue by way of tax revenue! If Australia had the same recovery rate, we would have generated an extra $303.3 billion or, another $9.5 billion per year!
Imagine what we could have done with that sort of income. It would have been highly beneficial to housing, health, NDIS and much more. To put this into perspective, we are talking about lost national income amounting to approximately ONE THIRD the size of our national debt!
Come on Labor. You know what you have to do and while you are at it, ditch that ridiculous Stage 3 tax cuts idea!
GB / AB