Flat gas royalty would 'end free ride' for LNG multinationals: Tax campaigners

The federal government could reap an extra $6 billion in tax revenue over the four-year budget horizon if liquefied natural gas projects operating in federal waters are brought under a simple royalty scheme that already applies to competing gas projects in Australia.

A flat 10 per cent Commonwealth royalty would, for the first time, force multinational-owned mega-projects like Chevron's Gorgon plant to pay for the publicly-owned resource it extracts.

The $1.5 billion-a-year revenue fix has been proposed by the Tax Justice Network in its submission to Treasurer Scott Morrison's review into the petroleum resource rent tax, or PRRT.

The review, led by former Treasury official Mike Callaghan, was announced by Mr Morrison in December, 12 months after Fairfax Media began to raise concerns that the PRRT was being gamed by fossil fuel multinationals and would not deliver any significant revenue for decades.

Tax Justice has called for a 10 per cent royalty similar to that paid by onshore developments in Queensland and the 33 year-old north-west shelf project off the coast of Western Australia.

But the industry has rejected any need for the PRRT to be tweaked.

In the submission of oil and gas lobby group, the Australian Petroleum Production and Exploration Association, also obtained by Fairfax Media, the industry warns that the PRRT is "operating in a manner that is entirely consistent with its design principles" and any changes could discourage further investment.

The association said the design of the PRRT, which allows a range of deductions for capital expenditure - the dollar value of which increases over time due to generous "uplift rates" - was successfully transforming Australia into the world's biggest exporter of LNG.

It said the current lack of PRRT receipts - just $800 million a year from the entire industry - was a result of a "period of very low prices, high project expenditures [and] the point in the production cycle of many large projects and a fall in petroleum liquids production in Australia".

But Tax Justice, said a 10 per cent royalty would end the "free ride" being enjoyed by LNG projects in Commonwealth waters.

"The 10 per cent royalty should be designed based on review of the existing state and Commonwealth royalties that already apply to all other oil and gas projects in Australia," it said.

"As with these existing royalty systems, the new royalty system would be deductible from PRRT, but the PRRT remains as a backstop that would collect additional revenue if and when prices increase substantially and when existing PRRT credits are exhausted.

"This royalty regime would support the important but basic principle that the Australian people should be paid a floor or minimum price for extracting and selling the nation's finite natural resources. No other industries, including other oil and gas projects, are able to obtain their inputs for free."

Tax Justice said its proposal would not be retrospective and would not create sovereign risk.

"Most importantly, this proposal would guarantee that Australians benefit from the commercial exploitation of our shared finite natural resources."

Based on LNG production, almost 90 per cent of Australia's LNG industry is owned by foreign multinationals, including Shell, Chevron, Inpex and ExxonMobil.

Five per cent of the industry is directly owned by the governments of Kuwait, Taiwan and Korea.

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The story Flat gas royalty would 'end free ride' for LNG multinationals: Tax campaigners first appeared on The Sydney Morning Herald.

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