One of the architects of Australia's tax system on natural resources, Craig Emerson, has backed calls for a parliamentary inquiry into why the boom in liquefied natural gas exports is failing to deliver any meaningful contribution to the public purse.
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Mr Emerson – who designed the petroleum resource rent tax with economist Ross Garnaut in the Hawke government – believes particular scrutiny should be given to extra concessions won by the oil and gas sector since the tax was first imposed on offshore projects in the mid-1980s.
Fairfax Media has revealed over recent months that just 5 per cent of 150 oil and gas ventures are paying any PRRT, despite Australia being poised to eclipse Qatar as the world's single biggest exporter of LNG by 2020.
The industry has built up a mountainous $187 billion in exploration and development tax credits, which continue to rise sharply and will be used to insulate the multinational petroleum companies from having to pay any resource rent tax for years to come.
According to a Treasury briefing to the Western Australian government, it could be decades before projects such as Chevron's Gorgon LNG plant and others pay a cent in PRRT.
"A rigorous, dispassionate parliamentary inquiry would be sensible,but not one with a predetermined outcome," Mr Emerson told Fairfax Media.
"It might focus especially on the concessions that were granted by the Howard government in the mid-2000s. It's unclear how important those concessions were to the integrity of the original PRRT."
Among the concessions accumulated by the industry since the PRRT's imposition under Labor is a write-off for "frontier exploration" in deep water that allows a company to claim 150 per cent of exploration costs back from the Australian Tax Office.
Petroleum companies were also cleared to "self-assess" their own resource rent tax liability, despite some multinationals being criticised for shifting profits out of Australia. Chevron was hit with a $300 million bill by the Federal Court in 2015.
Mr Emerson, a former Labor trade minister, has warned against a push to impose a traditional levy on every unit of gas pumped, saying the old system discouraged exploration and development. He did his PHD on profits-based resource rent taxes, overseen by Mr Garnaut.
Fairfax Media understands that Treasury officials are looking at the design of the PRRT system, and in August the ATO announced it was looking at three categories of deductibility in relation to the tax as part of its consultation with the industry.
In 2010, Ken Henry's review of the tax system raised concern about the PRRT's "failure to collect an appropriate and constant share of resource rents from successful projects due to uplift rates that over-compensate successful investors for the deferral of PRRT deductions".
By 2021 Australia will eclipse the Persian Gulf state of Qatar to become the world's biggest exporter of liquefied natural gas. In that year, Qatar will receive $26.6 billion in royalties.
According to Treasury estimates, Australia will receive $800 million for the same volume of gas – 100 billion cubic metres of LNG – leaving its shores.
Experts such as Diane Kraal – a senior lecturer at Monash University who has studied the petroleum resource rent tax since its introduction in 1987 – say the $1.8 billion paid to the Commonwealth by the multinationals in PRRT will not increase significantly "in her lifetime" if the system is not tightened by government.
She believes the PRRT, which was designed to net "super-profits" in the more volatile oil market, is overly generous for LNG producers that hold stable, long-term supply contracts but do not experience short bursts of rampant profits.
