John Freebairn writes in The Conversation (31.10.16) about how the petroleum resource rent tax must be reformed by the federal government to generate any significant revenue.
‘The way the petroleum resource rent tax (PRRT) is set up means mining usually generates some revenue, on top of the corporate income tax, for the government over the life of projects. However, there are concerns the PRRT will not always generate additional tax revenue.
‘The idea of the PRRT is to take a share of the money generated from our natural resources on behalf of all Australian citizens. However, the way it is structured means companies do not always have to pay up, and when mining ventures fail shareholders bear all the costs of their losses.
‘This is because in particular years the amount that can be taxed will be negative due to a number of factors. For example, a large number of project expenditures, including exploration and mine development, come before the production stage that generates revenue. Also, revenue can be relatively low in some years because of the cyclical nature of world commodity prices. This all means that companies will make a loss in some years and won’t pay any PRRT for the use of government-owned resources.
‘… It is clear we are far from the ideal PRRT. There are legitimate alternative views about the specific 40% tax rate and about the indexation rates for carry-forward losses. These are primarily political questions which need to be addressed by government experts rather than a public inquiry.’