Shining the spotlight on the petroleum resource rent tax
Kenneth WeeAustralian Taxation Office, PO Box 9990, Perth, WA 6000, Australia. Email: kenneth.wee@ato.gov.au
The APPEA Journal 58(2) 643-646 https://doi.org/10.1071/AJ17209
Accepted: 9 March 2018 Published: 28 May 2018
Abstract
The petroleum resource rent tax (PRRT), a 40% profits-based upstream tax that applies to Australian oil and gas projects, has come under significant scrutiny as to its effectiveness in providing an appropriate return to the community for the exploitation of Australia’s petroleum resources.
The April 2017 independent Callaghan review into the design and operation of the PRRT found that it remained the preferred way of achieving a fair return to the community from petroleum exploration and recovery, without discouraging investment into the sector. However, the Callaghan review recommended possible changes to the regime to improve its sustainability and compatibility with the current state of the industry, while ensuring fiscal stability for existing investments.
In response to the findings and recommendations of the Callaghan review, Australian Treasury embarked on a consultation process to investigate potential reform options to the PRRT. Government has yet to announce its decision on the way forward. What the future holds for the PRRT and the consequential impact on existing and new or proposed projects remain to be seen pending the Government’s chosen policy direction.
This paper covers the following:
• a survey of the economic rent theory underpinning the framework of the PRRT regime, including its pros and cons compared with other forms of resource taxation
• a review of key recent developments in the administration and interpretation of the PRRT law, and
• how the PRRT regime is anticipated to change and the associated repercussions on the after-tax economics and practical compliance for existing and future projects.
Keywords: Australian Taxation Office (ATO), Australia’s future tax system review, Callaghan review, closing-down, condensate, decommissioning, downstream, economic rent, ethane, exploration expenditure, feed gas, gas transfer price regulations, general expenditure, income tax, integrated gas-to-liquids operations, liquefied natural gas (LNG), liquefied petroleum gas (LPG), North West Shelf (NWS), offshore, onshore, PRRT, royalty, stabilised crude oil, shale oil, taxing point, uplift rates, upstream.
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. |
References
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