The Tax Justice Network has attacked the Turnbull government’s review of the petroleum resource rent tax (PRRT), saying its recommendation to not overhaul the tax for existing oil and gas projects is a capitulation to the industry.
It has also accused the government of hypocrisy for taking the oil and gas industry’s warnings about sovereign risk seriously while simultaneously proposing a surprise 0.06% levy on Australia’s major banks.
Jason Ward from the TJN says the PRRT has been changed “at least nine times” in the past to the benefit of the industry and no concerns of sovereign risk were raised then.
He said the government should equally be concerned about creating sovereign risk in the banking sector with its surprise bank levy, if it wanted to be consistent.
“The government’s proposal to introduce a levy on the largest domestic banks who already pay significantly more corporate tax did not raise any concerns of sovereign risk,” Ward told senators on Monday.
“Rather than make policy changes to fix a tax regime which is clearly broken, and in a sector that is dominated by foreign multinationals with a proven record of corporate tax avoidance, the government chose to score cheap political points with a populist play by taking a whack at the banks.”
Ward appeared before a corporate tax avoidance inquiry in Canberra on Monday, the first of two days of hearings to discuss the Callaghan review of the PRRT, which was released in April.
Michael Callaghan, a former Treasury official and the former chief of staff to Peter Costello, who wrote the review of the PRRT for the government, had given evidence earlier via telephone.
He defended his controversial recommendation to make minimal changes to the PRRT regime for existing oil and gas projects, saying greater changes would damage Australia’s reputation.
“My judgment was that changes to the design of the PRRT that impacted on existing projects ... would run the very real prospect of increasing perceptions of fiscal risk in Australia and potentially could deter future investments,” Callaghan told senators.
He said the government should equally be concerned about creating sovereign risk in the banking sector with its surprise bank levy, if it wanted to be consistent.
“The government’s proposal to introduce a levy on the largest domestic banks who already pay significantly more corporate tax did not raise any concerns of sovereign risk,” Ward told senators on Monday.
“Rather than make policy changes to fix a tax regime which is clearly broken, and in a sector that is dominated by foreign multinationals with a proven record of corporate tax avoidance, the government chose to score cheap political points with a populist play by taking a whack at the banks.”
Ward appeared before a corporate tax avoidance inquiry in Canberra on Monday, the first of two days of hearings to discuss the Callaghan review of the PRRT, which was released in April.
Michael Callaghan, a former Treasury official and the former chief of staff to Peter Costello, who wrote the review of the PRRT for the government, had given evidence earlier via telephone.
He defended his controversial recommendation to make minimal changes to the PRRT regime for existing oil and gas projects, saying greater changes would damage Australia’s reputation.
“My judgment was that changes to the design of the PRRT that impacted on existing projects ... would run the very real prospect of increasing perceptions of fiscal risk in Australia and potentially could deter future investments,” Callaghan told senators.
Jessie Cato, the national coordinator from Publish What You Pay, told the hearing that Australia had a serious “data problem”, with poor systematic data collection making it difficult to know what payments oil and gas companies made to state and federal governments.
She said although Australia was signatory to numerous international open data standards, its data was often private, published in closed format like PDF and located across numerous agencies and company websites, making it hard to test the claims of companies about the state of their books.
She said the 2017 Resources Governance Index published last week ranked Australia eighth out of 81 countries for overall resource governance but it then dropped to 32nd when ranked solely on revenue management.
“This is because we have no requirement for companies to publish their payments, our weak taxation laws left us behind other equivalent high-income countries and our government does not report systematically or on a granular level on production, exports, or payments disaggregated by company,” Cato said.
“That means that Australia performed worse than numerous African nations the Department of Foreign Affairs and Trade currently provides aid assistance to so that they can improve their extractive governance.
“As a powerful mining oil and gas player, Australia should not be this low. We can, and should be, a leader.”
She said although Australia was signatory to numerous international open data standards, its data was often private, published in closed format like PDF and located across numerous agencies and company websites, making it hard to test the claims of companies about the state of their books.
She said the 2017 Resources Governance Index published last week ranked Australia eighth out of 81 countries for overall resource governance but it then dropped to 32nd when ranked solely on revenue management.
“This is because we have no requirement for companies to publish their payments, our weak taxation laws left us behind other equivalent high-income countries and our government does not report systematically or on a granular level on production, exports, or payments disaggregated by company,” Cato said.
“That means that Australia performed worse than numerous African nations the Department of Foreign Affairs and Trade currently provides aid assistance to so that they can improve their extractive governance.
“As a powerful mining oil and gas player, Australia should not be this low. We can, and should be, a leader.”
The treasurer, Scott Morrison, said last week that the Turnbull government accepted in-principle the 12 recommendations from Callaghan’s review.
He released a consultation paper on Friday – three days before this week’s public hearing – suggesting ways the PRRT could be improved for future projects only.
