Billion-dollar gas tax plan faces a major hurdle
A bid to squeeze more taxes out of big gas producers could face an uphill battle to get through parliament after receiving a lukewarm response from the opposition and Greens.
Treasurer Jim Chalmers called for the parliament to support the overhaul of the petroleum resource rent tax (PRRT) to raise "more tax, sooner" from offshore gas projects and make a meaningful contribution to the budget.
The proposed changes, which include a 90 per cent cap on deductions to kick in on July 1, are expected to increase tax receipts by $2.4 billion over the forward estimates.
Dr Chalmers said the government aimed to strike a balance between getting a better deal from Australian resources and protecting investment, supply and international relationships.
The peak body for oil and gas producers backed the changes, saying Labor had weighed up the sustainability of the budget and the need to support the gas sector.
"The announcement today will provide greater certainty for our industry to consider the future investment required to maintain both domestic and regional gas supply security for our customers," Australian Petroleum Production & Exploration Association chief executive Samantha McCulloch said.
The Treasury review that triggered the changes was initiated by the Morrison government before it was put on hold during the pandemic and the opposition did not rule out providing its support.
Shadow treasurer Angus Taylor said the "devil would be in the detail" while raising concerns about Labor's track record on changing tax settings that applied to the sector.
"I'm not going to comment until we've seen the detail," he said.
Dr Chalmers said the coalition would be "dealing the Greens in" by voting against the changes and that was not what the industry wanted.
Greens senator Dorinda Cox said the party was also waiting for more detail on the proposal but it was unlikely to be ambitious enough.
"We could be raising absolutely tens of billions of dollars in PRRT tax across the country, but instead we are letting the gas corporations write this policy," she said.
"It's a great example of state capture - the capture of political donations in this country, the capture of our governments being able to make the decision."
Dr Chalmers said he was hopeful the parliament would support the changes.
"My message to the Greens in the Senate is if they vote against this they're voting for lower taxes from these projects," he said.
Independent economist Chris Richardson, of Rich Insight, said the changes were welcome but modest.
Mr Richardson said by limiting the deductions companies could claim, the government had adopted a kind of "minimum tax" on producers.
"Bottom line? A welcome policy change, even if more modest than I'd have liked to see," he wrote on Twitter.
The federal government also announced an extra $4b to help pay the wages bill for government and community organisations.
The changes will see the five-year averaging of the wage component of indexation removed so funding better reflects changes in economic conditions.