Why the gas tax momentum is building to stop selling Australia short

Coverage Comparison

The debate over taxing Australia's gas exports has intensified following renewed calls from former Treasury Secretary Ken Henry for a windfall profits tax. Coverage from ABC Australia and The Guardian highlights the key arguments and political dynamics, though each outlet emphasizes different aspects of the story.

ABC Australia's report focuses on Henry's testimony before a Senate inquiry, where he made an impassioned plea for the government to act in the national interest, telling lawmakers to "stop the crap that the Australian public have put up with for decades now in respect of taxation of Australia's finite resources." The outlet also notes that Prime Minister Anthony Albanese has quietly ruled out a 25 percent export tax in the upcoming budget, echoing industry concerns.

The Guardian's coverage centers on Henry's written submission to a parliamentary inquiry, in which he proposed a 100 percent windfall profits tax. The submission argues that the "socially optimal" rate would be approximately 100 percent, with revenue potentially invested in a sovereign wealth fund or used for environmental and tax reform.

Key Claims

Ken Henry has proposed a 100 percent windfall profits tax on gas exports in his submission to a parliamentary inquiry, according to The Guardian. The former Treasury Secretary, who authored the 2010 review that led to the short-lived mining super profits tax, argues that windfall gains from events like Russia's invasion of Ukraine should be taxed to benefit the Australian people.

A separate proposal, reported by ABC Australia, suggests a 25 percent export tax could raise $17 billion annually, according to an estimate from the Australia Institute. This figure has been cited by proponents as evidence that the current tax system is failing to capture the value of the nation's resources.

The Petroleum Resources Rent Tax (PRRT), once considered world-leading policy, currently raises around $1 billion a year despite significant growth in gas exports, as reported by ABC Australia. This has led to criticism that the tax regime is not delivering adequate returns to the Australian public.

Gas companies, including Chevron, BP, ConocoPhillips, and Shell, have opposed the proposed taxes, warning that they would threaten investment in new projects and heighten perceptions of sovereign risk. Industry representatives argue they already pay approximately $20 billion a year in taxes, a figure that could be jeopardized by new levies, according to ABC Australia.

However, Henry dismissed these concerns as "self-serving" in his submission, writing that "any proposal to generate more tax revenue from windfall gains accruing to foreign owners of capital will draw self-serving criticism from those supplying the capital." He argued that investments meeting their cost of capital before a tax would still do so after its introduction, describing this as a "tautology" for those with an understanding of economics.

Perspectives

Proponent Perspective: Advocates of the windfall profits tax, including Ken Henry and the Australia Institute, argue that the Australian people should benefit from their finite natural resources. They contend that the current PRRT system is outdated and fails to capture revenue from windfall gains, such as those driven by global price spikes. A 25 percent export tax could raise $17 billion annually, while a 100 percent windfall tax could fund sovereign wealth, environmental repair, and tax reform, according to The Guardian's report.

Industry Perspective: Gas companies warn that new taxes would deter investment, alienate key international buyers such as Japan, Malaysia, and South Korea, and create sovereign risk. They emphasize that they already pay billions in taxes and that additional levies could threaten the viability of future projects. These concerns have been echoed by Prime Minister Albanese, who reportedly ruled out an export tax in the upcoming budget, as reported by ABC Australia.

International Buyer Concerns: Japan and other Asian buyers have expressed concerns that higher gas taxes could impact contracted purchases, according to a claim carried by a single outlet and not yet independently verified by other sources. Proponents of the tax argue that buyers would be unaffected, as exporters would still supply gas at market prices, but this remains a point of contention.

Temporal Context

This is not the first time Henry has advocated for a resources super profits tax. His 2010 review recommended a 40 percent mining super profits tax, which was implemented under then-Prime Minister Kevin Rudd but later watered down by Julia Gillard and eventually abolished under Tony Abbott. Henry argues that the justification for such a tax still exists, 16 years on, particularly given the recent windfall gains experienced by gas companies following the conflict in Ukraine.

The Australian government is reportedly considering introducing a windfall profits tax ahead of the federal budget, though reports suggest this is unlikely in the short term. The debate reflects broader questions about how nations should tax non-renewable resources and ensure that public wealth is shared with citizens, a topic that also draws comparisons to Norway, which taxes natural resources at an effective rate of 78 percent and has built a $2.2 trillion sovereign wealth fund, as reported by ABC Australia.