Richard Denniss is calling for a gas export tax, but an effective royalty system would be a better option

Richard Denniss, the head of the Australia Institute, has advocated for a gas export tax to address the ineffectiveness of the current Petroleum Resources Rent Tax (PRRT) in generating revenue. However, Denniss argues that an effective royalty system would be a better option. The PRRT differs from a royalty system, as it is levied on profits, while royalties are calculated on either production volume or market value.

This means that even a company with no taxable income still pays a royalty based on production. Denniss claims that the PRRT has become ineffective due to gas companies being exempt from the tax, resulting in a "free" resource for them. He suggests a 25% gas export tax, but his proposal is criticized for focusing on the gas industry's alleged "trickery" rather than addressing the PRRT's shortcomings.

An alternative approach could be to implement a 25% export gas tax, but the essay does not provide details on the tax's application, such as whether it would be levied on export volumes or value. A royalty system, on the other hand, taxes resources at the wellhead, ensuring that all companies pay for the resource they extract. Denniss also points out that a 25% gas export tax would unfairly exempt domestic gas stocks extracted from Commonwealth waters, while Saudi Arabia, Norway, and Qatar have successful royalty systems for their gas industries.