Labor set to ignite Greens fight over $2.4b resources tax

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Labor has set up another policy clash with the Greens by unveiling a draft law to recoup $2.4 billion from gas exporters, while naming big global companies as the “most fertile ground” for broader tax reform.

Treasurer Jim Chalmers ruled out increasing the GST in response to a reform wish list from the Business Council of Australia on Monday, but he cleared the ground for a vote in parliament on lifting revenue from gas and oil.

Treasurer Jim Chalmers has ruled out an increase to the GST.Credit: Alex Ellinghausen

The government has called on the Greens to back a $10 billion housing fund that is stalled in the Senate as well as a looming “help to buy” scheme for people purchasing their first homes, turning the tax into a third key decision when parliament resumes on September 4.

But the Greens are demanding a doubling of the tax on oil and gas, while the Coalition is yet to confirm its support for the tax rise in the latest draft.

Chalmers said the changes to the petroleum resource rent tax (PRRT), released in draft form on Monday, should be backed by the Coalition and the Greens because it would increase revenue without hurting export customers.

“If the Greens want the industry to pay more tax sooner, then they’ll vote for our legislation,” Chalmers said.

“And if the Coalition want the model which best guarantees supply, and best safeguards our international relationships, they’ll vote for it as well.”

The changes to the PRRT aim to increase revenue by $2.4 billion over five years by capping deductions for big exporters such as Chevron, Shell and Woodside following years of calls from the Greens and others for a higher tax on gas exports worth $92 billion in the year to June.

Greens spokesman Nick McKim has called for a doubling of PRRT following the surge in gas prices worldwide as a result of the Russian invasion of Ukraine, but the government is asking the minor party to back the more modest increase when it is put to the Senate.

The government collected $2.2 billion in PRRT in the 2022 financial year, reflecting only some of the period after the invasion. The May budget forecast $2.8 billion this financial year, reflecting the policy change as well as assumptions about prices and volumes.

The new policy aims to increase revenue by $500 million this financial year, followed by $600 million, $800 million and $500 million in each of the subsequent years.

McKim did not comment in response to Chalmers’ call on Monday, but has previously warned against a deal between Labor and the Coalition rather than a negotiation with the Greens to increase the tax.

“The gas corporations have already bullied Labor into making its changes to the PRRT close to meaningless,” McKim said in May.

“Now those same corporations are using the Liberals to get their golden deal through parliament with some side benefits along the way.”

The peak group representing the exporters, the Australian Petroleum Production and Exploration Association, has called the PRRT changes “relatively modest” compared to the greater challenge it faced from the tougher export controls the government imposed this year to boost domestic gas supply.

Business Council of Australia chief executive Jennifer Westacott said GST reform should be part of a conversation about a better tax system, days after Labor delegates also urged the government to consider tax reform, but with a focus on higher revenue from big companies.

“It needs to be on the table, what we’re calling for is comprehensive tax reform,” Westacott said of changes to the GST.

“We’re saying we have to look at the whole system, particularly the mix of taxes. We’re too reliant on direct income taxes and company tax. We’re simply calling for a conversation that says let’s put all of this on the table.”

Chalmers ruled out the GST option, however, and did not indicate any appetite for broad tax reform in this term of parliament or the next.

“We think the most fertile ground for tax reform is multinationals, high-balance superannuation compliance, cigarettes and PRRT reform,” he said.

The government has already outlined policies on each of the items in that list, including changes to tax compliance, superannuation, multinational tax, tobacco and PRRT in the May budget.

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