Speakers: AM Agenda, Host Laura Jayes; Business Council of Australia Chief Executive Bran Black
Topics: Fuel supply, new gas tax
E&OE
Laura Jayes, AM Agenda Host: I want to bring in now the BCA CEO Bran Black. Bran, thank you for your time. Of course, when the Strait of Hormuz does fully reopen, what that looks like is something we’re all trying to gauge an impact on. We wake up to news of this fire at the Geelong refinery. What are you hearing about that, the ongoing impact there.
Bran Black, Chief Executive: Well, thanks, Laura. It’s good to be here. I think if you were looking at the situation that we’re in 10 years ago and saying to yourself, “Well, will we see a global pandemic? Will we have tariffs imposed on us? And will we have the Straits of Hormuz closed and a fuel supply crisis as a consequence of that?” chances are you’d say, “Well, that’s just beyond the realms of the possible.” And yet, here we are.
We are dealing with significant challenges right across the board at the moment, and what that really underlines is the importance of a genuine conversation in Australia about what our national resilience looks like. It’s clear that we do have some gaps, and we need to do some work to try and address those gaps.
Laura: Bran, we see Madeleine King in a piece from Phil Coorey this morning all but confirmed that a tax on gas profits is being considered. I know you’ve written in the AFR today as well. What proportion of the value of our exported gas is actually captured under the PRRT at the moment?
Bran: Well, I think that the significant point to note with respect to the PRRT specifically is that it’s operating in such a way that means that you’re intending to capture profits and taxation in subsequent years. So in the early years, companies are relying on the very significant deductions that they accrue as a consequence of the extremely significant capital investments that they make.
But the critical point to note in terms of tax contributions, as I noted in my opinion piece today, is that Australia’s gas companies are contributing, in the last year, $21.9 billion in taxation and royalties to Australia. That’s a very significant contribution.
What I’m also saying is that we have to make sure that we recognise the criticality of Australia retaining its capacity to secure new supply. We know we’re facing into shortages within the next few years. To get that supply, we need new investment. To get that investment, we need stable settings that are reliable and dependable.
Laura: But when you look at the value of exported gas that is captured under the PRRT, it’s 3 per cent, isn’t it?
Bran: But you’ve got to look at the totality of the taxation contribution that these companies make. That’s where the real value comes into play, and as I say, the PRRT is intended to really capture value over subsequent years, not so much in the early years. It’s only been a couple of years since changes to the PRRT were made.
What we really need to do is consider that, at the end of the day, we are trying to secure more supply, and that if we take the approach that some jurisdictions take overseas by actively trying to do what they can to secure that supply, ultimately we’ll be better off.
Laura: But when you look at the 3 per cent figure, when you look at the substantial campaign at the moment, I don’t want to make cheap comparisons here. I think we need to remember that our gas exports, our gas companies are so critically important.
We’re being reminded of that at the moment, but given these are resources that can only be captured once, Australians are growing louder in their frustration, they don’t think this is a fair return.
Bran: Again, it comes down to looking through a long-term prism, we need to secure long-term supply. It’s not a theoretical concept, the points that I’m making now we know, for instance, that in the United Kingdom, they varied their approach to taxing gas companies, they imposed these super profits taxes and last year in 2025 for the very first time in 59 years, they had no applications for new development, no new applications.
We cannot afford to find ourselves in that position, especially in circumstances where we know that we’re going to face into shortfalls of our own. So we need to be thinking about the long term, we need to be recognising that companies have mobile capital, they have options to invest in other jurisdictions, like the US and Canada, and if we impose settings that are uncompetitive, that’s precisely what they’ll do.
Laura: The UK is one comparison. We can also look at Qatar, they capture far more value. There’s, of course, the Norwegian example as well. Why don’t you look at those?
Bran: Well, very happy to look at those. Both the Qatar and Norwegian examples are fundamentally different to the Australian situation. In Qatar, they’re state-owned entities, and so you expect that as a consequence of that, they’re going to derive a much greater return.
In Norway, you’re looking at a jurisdiction that does a couple of things. In the first instance, it’s very pro-oil and gas, so it tries to encourage approvals being made very quickly. Secondly, it allows immediate expensing for all capital expenditure. So for instance, if you were to spend $100 million to in any given year, you’d get a deduction of that full $100 million in the year in which you make that expenditure.
And thirdly, and perhaps most importantly, Norway shares in the downside as well as the upside. So if you make a loss, say you made a $100 million loss, the Norwegian Government would pay you as a gas company up to $70 million, so it’s a fundamentally different set of circumstances that we’re talking about in all of these types of scenarios. The closest one that we can point to is the British scenario. That’s closest to what’s being proposed at a federal level. And as I said, that shows very clearly that when you put in place the wrong settings, you deliver outcomes that are just unsustainable.
Laura: The bottom line here is Bran, that there seems to be a pretty white-hot anger about this. Something is going to change. We see the Government talking about it at a Cabinet level ahead of this Budget. Yes, there is a split, but surely the gas companies realise that they’re either going to help shape a more equitable and politically palatable outcome here, or are they just going to fight for the status quo?
Bran: Well, I think one way or the other, we have to recognise that putting in place settings that are reliable and dependable is the most important thing that we can do for the sake of our own security, our own price security moving forward, and also for the sake of the quality of the relationships that we have with our partners and our friends, particularly in North Asia, that depend upon this critical resource.
It’s so important that we get these settings right, and our very strong argument to the Australian Government is that we are already an uncompetitive tax jurisdiction, so we are urging no changes, particularly at this time.
Laura: But are these settings right? Why not negotiate, for example, faster approvals, but a fairer return? Is the status quo really what you’re sitting here arguing for today?
Bran: Well, we would encourage faster approvals in any case, we think that that’s so important. And to speak to what Norway does, they have fast approvals in place, and they look to actively encourage more development. We would like to see more development.
We know that if we can get faster approvals, if we can expand the scope for this industry to prosper, then ultimately that will grow the pie, if you will, and secure a greater tax return to the Australian people.
Laura: In the short term, though, there are early deductions – you say, all this money will come to fruition for the taxpayer in the years ahead. But they’ve been told that for quite some time, and as I understand it, with the PRRT, you can not only make deductions in the investment and discovery phase, but you can transfer those deductions to other projects. I come back to this, this point, do you think that Australian taxpayers think that is a fair return, 3 per cent of exports?
Bran: I think you’ve got to consider the position in its totality. So when you look, for instance, at the company tax that’s paid by gas companies –
Laura: I understand that, but do you think you’re winning that argument, because politics is pretty important in this context right now, especially ahead of the Budget?
Bran: But we make evidence-based policy arguments, that’s our job. And what the evidence shows is that we’ve seen over the course of the last few years that the tax receipts for the Commonwealth in the company tax category have dramatically increased, and in the same way we expect in due course, that tax receipts under the PRRT will also increase. That’s the nature of not only if the investments –
Laura: When’s due course?
Bran: I can’t speak to the specific circumstances of individual companies.
Laura: Five or ten years? It is, it is beyond that, though, isn’t it?
Bran: What I can say very clearly is that with respect to the company tax arrangements, we have seen the company tax receipts increase by about four times over the course of, I believe, the last five years or so.
Now that’s very significant, and we would expect to see a ramp up in tax receipts with respect to the PRRT as well. That’s precisely how the tax has been designed, and that’s precisely what we would expect to see.
Laura: Okay, Bran Black, thanks so much for your time. Appreciate it.