So, if Australian (and UK) oil and gas was taxed more then there would be more tax revenues. Hmm, well, OK, why not?
Well, partly because Gordon Brown tried this. It was actually The Guardian that reported it too – UK taxation on the North Sea so reduced production that the tax take fell. That Laffer Curve spotted in the wild again.
But here there’s a horrible hole in the basic argument:
A recent report found that “Australia exported an estimated 75.1m tonnes of liquefied natural gas (LNG) in 2018-19” and that, by 2020, we will overtake Qatar as the largest exporter of LNG in the world.
Yet we earn only around $600m in annual taxes from LNG exporters, compared with Qatar’s take of more than $26bn.
Juan Carlos Boué, a researcher at the Oxford Institute for Energy Studies, found that, in the decade since 2008, Australia has imposed an effective tax rate (ETR) of 21% on gross industry income from petroleum exploration and production.
Boué calculated that, if that income “had attracted the ETRs which oil and gas activities attracted in Denmark and Norway during this same period (49 and 54%, respectively), then the Australian federal government would have received an additional US$71 or 84bn” in revenue.
We should be demanding a much higher return on the profits of the multinational mining companies that extract and export our non-renewable energy resources.
That report is here. And guess what numbers aren’t in it? That’s right, the cost of extracting oil and or gas in Oz, Qatar, Denmark, Norway and the rest.
Which is what we need to know before we can decide whether the tax rate is reasonable or not.
The taxation of resource extraction righteously falls into two different parts. Firstly, there’s the value of the stuff just being there. The bloke God got in to do the building work stuck such resources in different places, under different amounts of rock and sea, in different weather conditions and so on. The costs of getting them out thus differ.
That value of it just being there differs therefore. And it is that being there value, the resource rent, which is what should be righteously taxed. Until the pips squeak too – for no one trying to extract them is responsible for their being there. Thus the efforts of people to put them there can’t be affected by the tax rate on their existence.
The efforts to extract them, the capital, labour, knowledge, used to get them out, sure, people should make a decent return on that. But, as above, those costs and righteous returns differ. So that resource value, that should be taxed, also differs.
And, as it happens, hammed a tent peg into Qatar and you get natural gas. To get the same in Oz or the UK you’ve got to build a vast offshore platform, pipelines and the rest. That is, the resource value of the same extracted value amount of oil and or gas is different. Therefore so is the possible – and righteous – tax take.
This being the one thing the report doesn’t mention. That difference in extraction costs. Therefore the report is a vomitous, a technicolour yawn. But then it’s The Guardian talking about tax and economics so that’s normal, ain’t it?