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Better than Buckleys: a real plan to tackle energy prices, climate and the Budget to boot

by Michael West | Aug 17, 2022 | Energy & Environment, Latest Posts

Axe fossil fuel subsidies, bring in a Carbon Export Levy, fix tax and royalty loopholes. Michael West reports on a compelling plan to dramatically reduce Australia’s debt and soaring energy bills.

If only there were a way to smash soaring energy bills, tackle Australia’s mountainous debt – and the monstrous foreign tax dodgers of the multinational fossil fuel sector – and do the climate a big favour to boot. All at once.

There is a way. The question is, is there a will?

One of the nation’s top energy finance experts, Tim Buckley, has released this morning a $322bn solution: wind back fossil fuel subsidies, fix the failed royalties scheme, tap foreign coal and gas profiteers for tax, and introduce an Export Gas Levy.

Buckley’s report, Windfall profits: time to fix loopholes and subsidies to serve Australians better makes compelling reading.

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The problem is that this country’s most profitable companies are also our most polluting and most aggressive tax avoiders. We are not talking about BHP and Rio Tinto. Some of our domestic multinationals tip in a fair share.

It’s the likes of Exxon, Shell and Energy Australia.

They’re not shivering in Honkers: Australians’ electricity pain is two billionaires’ gain

 

Yesterday we got some perspective on the astronomical profits being reaped in the coal sector when BHP released results for its coal division. The BHP Mitsubishi Alliance (BMA) notched up a 73% return on assets. If 10% is a respectable ROA, 73% is virtual banditry given the $1bn a month in public subsidies for the fossil fuel sector. 

These soaring returns will be replicated by all the coal and gas giants as they hand down profit results later this year. 

Key findings of the report by Buckley’s group, Climate Energy Finance, finds that by fixing loopholes and subsidies in our tax and royalties regime, $322bn could be added to the budget bottom line over the next decade.

Bear in mind that royalties are *not* taxes; they are the cost which corporations pay to governments to extract our minerals from Australia’s soils and seabeds. Just like bakers pay for their wheat and yeast, miners pay for their coal. But not nearly enough. 

The failed Petroleum Rent Resources Tax generated a record low $900m in FY2021 and continues to deliver just a 3-4% royalty on offshore oil and gas for Australia. This is despite $11bn being spent in fossil fuel subsidies in 2021/22.

If the politicians could summon the will to cap fossil fuel rebates, another $4-$5bn would be raised annually.

Then there is taxing multinationals. As Buckley points out, the gas giant ExxonMobil paid zero corporate tax on $16bn of revenue in FY2020, Shell paid zero tax on $5bn of revenue and the Hong Kong-owned Energy Australia paid zero corporate tax on $7bn of revenue. (In contrast, the BHP release yesterday showed the company paid $10.5bn in income tax and royalties.)

The other elephant in the room is soaring electricity prices at home while the multinational LNG exporters rip out record profits selling our gas offshore.

An Export Gas Levy, says Buckley, would fix it. “Despite East Australia gas production trebling since 2014, Australians are being smashed by gas cartel gouging. A new export-only East Australia gas levy would immediately provide the price signal to prioritise domestic use and would bring in much-needed federal revenue whilst immediately reducing both gas and electricity prices in our domestic market by the full extent of the export levy”.

Charting the carbon fix

Source: Climate Energy Finance

Source: Climate Energy Finance

Last week, federal Treasurer Jim Chalmers announced a parliamentary inquiry into multinational tax reform. Come the October Budget, we will see just what a desperate fiscal mess the Coalition has left behind. In the wake of the ACCC’s report on the gas profiteers, Resources Minister Madeleine King, no stranger to the affections of the gas lobby, also went so far as to say the fossil fuel oligopoly which controls the market had lost its “social licence” to operate.

There is talk of pulling the “gas trigger” but the trigger tackles volume, not price.

“You can probably halve the price of electricity annually by bringing in an East Coast gas export levy because the gas peakers and Snowy Hydro determine the price in the National Electricity Market (NEM) the majority of the time,” says Buckley.   

Key points in the Buckley proposal:

  • Introducing an equitable multinational corporate taxation and progressive royalty regime on Australia’s public fossil fuel resources could contribute $322bn of tax and royalty income over the coming decade. If applied from July 1, 2022, the $55bn boost in 2022/23 would be 5-10 times that contributed by fossil fuel companies in 2021/22”. $55bn is 54 times the annual federal spend on environmental protection.
  • This would deliver a net benefit to domestic energy users and Australian corporates by funding government programs including the stage three tax cuts committed prior to the federal election, offsetting the skyrocketing domestic energy costs by funding gas substitution and energy efficiency programs and lowering the domestic cost of gas and hence electricity produced from Australia’s public resources.
  • The flip-side of the energy crisis is fossil fuel windfall super-profits.
  • Australia is being impacted by concurrent fiscal, energy and climate crises. Unprecedented hyperinflation of fossil fuel prices globally is being driven by Putin’s invasion of Ukraine.
  • As one of the three largest fossil fuel exporters, Australia’s industry is set to book record high profits in 2022. This should be clearly termed what it is: war profiteering.

Coal royalties 

  • Climate Energy Finance (CEF) applauds the political courage of Queensland Treasurer Cameron Dick in introducing an exceptionally progressive six tiers coal export royalty regime ranging from 7-40% of revenues to ensure Queenslanders suffering from hyperinflation of domestic energy costs see some sharing of the fossil fuel industry’s windfall gains in the form of increased government investment in areas such as hospitals and the new critical minerals industry.
  • CEF notes that despite coal lobbyist claims, Queensland’s coal export average royalty rates are still well below the average 34% royalty / excise regime applying in the Indian coal industry.
  • The flat 7-8% coal export royalty rate currently in place in NSW is overdue for immediate review.
  • CEF calls on NSW Treasurer Matt Kean to share the state’s coal export windfalls with the people of NSW by instituting a royalty regime comparable to Queensland’s, rather than leaving all these super-profits to the predominantly foreign tax-haven based multinationals exploiting public resources for private gain, often while also paying zero corporate tax and benefiting from multibillion-dollar fossil fuel subsidies.

Taxation of fossil fuel multinationals

The Australian Tax Office (ATO) Transparency initiative publicly details that the majority of the top tax avoiding fossil fuel multinationals have paid precisely zero corporate tax here in the seven years (2014-2020), on a collective $228bn of revenues.

  • Following the successful prosecution in 2017 of Chevron’s flagrant tax avoidance over the past decade, the ATO has made progress on reducing the massive competitive disadvantage inflicted on Australian domestic firms by rampant multinational tax avoidance.
  • Thin capitalisation rules are one obvious ongoing loophole.
  • The multiple reviews of the entirely compromised Petroleum Rent Resources Tax have highlighted the potential $230bn budget boost by 2050 – sufficient to fund a quarter of former treasurer Josh Frydenberg’s trillion-dollar legacy.

CEF calls on the federal Treasurer to put the interests of 25 million Australians ahead of the foreign tax-avoiding gas cartel and ensure our existing federal fossil gas royalty program delivers on the funding industry promised a decade back.

An east coast fossil gas levy

  • An east Australia fossil gas levy applied only to gas exports would immediately divert supply to domestic users, and create a domestic price differential equal to the level of the levy.

Fossil fuel subsidies

  • It is time Australia ceased all fossil fuel subsidies ($11bn in 2021/22). CEF calls for an annual cap on the diesel fuel subsidy of $50m per firm. This would give an immediate $4-5bn p.a. revenue lift whilst improving Australia’s energy security and incentivising electrification and decarbonisation.

 

The power bill Australia can’t afford!

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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