Achieving tax certainty for oil and gas projects
Kenneth WeeAustralian Taxation Office, PO Box 9990, Perth, WA 6000, Australia. Email: kenneth.wee@ato.gov.au
The APPEA Journal 57(2) 577-580 https://doi.org/10.1071/AJ16227
Accepted: 3 April 2017 Published: 29 May 2017
Abstract
In recent years, oil and gas companies have been exposed to prolonged periods of volatile oil prices, rising costs and productivity challenges, scarcity and affordability of capital, heightened regulation and accountability and the competition of emerging alternative renewable energy sources. As Australian projects weather the current global oil price and demand–supply dynamics, the future prospects of greenfield and brownfield opportunities will depend on how well proponents can achieve certainty over the geological, geophysical, socioeconomic, operational, political and fiscal aspects affecting their projects.
Establishing certainty of the tax regime and how it will apply over the lifetime of a project is crucial to its after-tax economics and is therefore a central piece of the puzzle that must be solved to secure project investment sanction. This is particularly prudent in an era of increased scrutiny by communities and tax authorities globally on multinationals contributing their fair share of taxes wherever they operate. So, how is tax certainty attained from the outset, and protracted disputation mitigated, in an environment where the tax law is constantly evolving?
Early engagement with the Australian Taxation Office (ATO) is critical to understanding and assuring how the tax law will be interpreted and administered. This paper discusses: (1) best practice ATO engagement avenues for entities seeking to manage the Australian tax profile of oil and gas projects; (2) how to achieve justified trust and be tax-assured; and (3) the types of ATO products best suited to addressing particularly significant tax considerations confronting oil and gas projects.
Keywords: advanced pricing arrangement (APA), annual compliance arrangement (ACA), Australian Taxation Office (ATO), early engagement, Goods and Services Tax (GST), income tax, international related party dealings, justified trust, key taxpayer engagement (KTE), law companion guideline (LCG), liquefied natural gas (LNG), multinational anti-avoidance law (MAAL), Petroleum Resource Rent Tax (PRRT), practical compliance guideline (PCG), ruling, tax assurance, taxpayer alert, transfer pricing.
Kenneth Wee is an Assistant Commissioner – Senior Tax Counsel with the Australian Taxation Office (ATO). Prior to joining the ATO, he spent over 14 years in chartered accounting where he specialised in providing advice on Australian corporate tax and Petroleum Resource Rent Tax to clients in the oil and gas industry. Kenneth’s experience encompasses advising on corporate and international tax, restructures, mergers and acquisitions, financing and capital management. He has also worked extensively in the areas of tax audits/reviews, rulings, cooperative compliance, tax law policy and design advocacy, and managing tax controversies and disputes. |
