And it would smooth out PRRT collections over time. That is, you are bringing forward future tax at a discount rate of 5% above the bond rate. This would bring in immediate money, and the unclaimed losses would go forward with the 5% rate. With the current political resistance to change in mind, one simple tax bring forward idea is to legislate that, when current year profits are above a certain level, then only, say, two thirds can benefit from the carry forward of past losses, and the remaining third is subject to PRRT without the uplift. In a speech I gave late last year, I said: The government’s changes mean that, after seven years of production revenue, companies will only be allowed to offset costs carried forward against 90% of their income for PRRT purposes the costs that would have been offset against the other 10% are carried forward at the bond rate. Thus, generous cost carry-forward arrangements were applied to an industry to which they were extremely badly suited. Not only were the cost carry-forward factors, which need to be offset before any PRRT is paid, seen as generous at the time, as the then government sought to do all it could to encourage investment in petroleum in Bass Strait, they were not designed for the gas industry with its longer lead times from exploration to production. Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundupĪustralia’s PRRT was designed for the oil industry in the mid 1980s. Countries in many parts of the world impose resource rent taxes to share the benefits of these high returns with the countries’ population at large, who own these resources. Such rents, or excess returns, often accrue in extractive industries which periodically see very high prices, as has happened with gas as a result of the war in Ukraine. Economic rent is income above that which is necessary to attract the economically optimal amount of investment into an activity.
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