BCA slams proposal for gas tax on gas exports

The government has been warned against introducing an additional tax for gas exporters by the Business Council of Australia (BCA) following a push by a number of independent politicians for higher taxes to be applied to gas exports amid surging energy costs.

Independent MP Allegra Spender, Senator David Pocock, and the Greens have all called for a minimum 25 per cent export tax on gas revenue, which they said could be used to help people with rising fuel costs.

The BCA slammed the proposal, arguing that it would discourage long-term investment and could increase energy costs for Australian households.

BCA chief executive Bran Black said an additional gas tax would be inconsistent with Australia’s efforts to secure reliable energy supply arrangements with trading partners, as it would increase the tax burden on the energy exported to them and therefore the cost they pay, and an affordable long-term domestic supply.

“At a time of global uncertainty and heightened energy security concerns, it’s important that Australia maintains policy settings that encourage, rather than discourage, long-term investment in the timely development of new gas supply,” he said.

“Australia’s reputation as a reliable trading partner has been built over decades, and maintaining this reputation will be critical as regional partners continue to rely on Australian energy to support their own security and transition goals.”

With projected domestic shortfalls just a few years away, Black said Australia needs more gas to support our energy transition, not less.

“Australia’s existing tax system already captures higher returns when prices rise. At a time when we are competing globally for capital, increasing the burden on business risks undermining investment, reducing supply and making Australia less competitive,” Black said.

“The reality is that Australia is already a high-tax jurisdiction, with the BCA’s Global Investment Competitiveness Index showing we rank just 38th on business taxation out of 42 economies.”

The business lobby group said that Australia’s gas sector already operates under a substantial tax burden, with recent analysis by Wood Mackenzie estimating effective tax rates of around 53 to 58 per cent across corporate income tax and the Petroleum Resource Rent Tax for offshore projects.

It also noted that in 2024–25, the oil and gas sector contributed $21.9 billion in taxes and royalties to the Australian and state governments.

Spender said the war in the Middle East had driven up gas prices and was merely a by-product of an unexpected war, rather than the result of wise investment decisions.

The government, she added, should apply a windfall tax to ensure Australians get a fair share of the windfall from their natural resources.

The Greens also recently highlighted that 56 per cent of all Australian gas is exported without paying a cent in royalties.

“The USA’s illegal war in Iran is already making Australia’s gas corporations even richer. The government needs to act now to stop this war-profiteering and ensure Australians get our fair share of gas wealth,” the Greens said.

Following the establishment of the Select Committee on the Taxation of Gas Resources last month, several committee hearings are scheduled this week in Canberra and Perth to explore potential changes to the tax treatment of gas production and exports.

In a submission to the Select Committee, the Grattan Institute noted that while Treasury is reportedly modelling a 25 per cent windfall profit tax, it was not yet clear how this model would be calculated to apply only to windfall profits accruing to international crises.

“It would be worthwhile to consider indexing the windfall profit tax to a public and transparent marker such as the price of Brent Crude, but at the rate of say, 50 per cent of windfall revenue,” it said.

Grattan said that gas producers will strongly resist both forms of windfall profit taxes.

“The arguments will be based firstly on claims that there are no such things as windfall profits, but just the normal operation of the market,” it said.

“The evidence of 2022 and 2026 suggests otherwise, and the nature of geopolitical instability seems unlikely to dissipate any time soon.”