War-driven ‘supernormal’ gas profits must be taxed more, crossbench says

As war in the Middle East threatens Australia’s energy security, the government is under growing crossbench pressure to impose additional taxes on liquid natural gas (LNG) exports.

In the House of Representatives on Monday (23 March), independent senator Allegra Spender asked Treasurer Jim Chalmers whether the government would consider imposing a windfall tax on gas exporters as war drove price spikes.

“The war in the Middle East is driving gas price spikes, which is great for resource company revenue, but Australians are hurting,” Spender said to Chalmers.

“This boosted revenue is not a reward for wise investment decisions. It is a by-product of an unexpected war. Will you impose a windfall tax, as other nations did in 2022, to ensure Australians get a fair share of this wartime windfall from their natural resources?”

Chalmers responded that the government hadn’t changed their policy, although he acknowledged there was a “range of views about the best way forward.”

“When it comes to tax, the big focus is on those tax cuts that we're rolling out in July and in July next year as well, opposed by those opposite but voted for by the member for Wentworth. Any further steps on tax reform would be a matter for cabinet in the usual way,” he said.

That being said, last Friday (20 March), the ABC reported that the Department of the Prime Minister and Cabinet had requested modelling of “new levy options” to tax windfall profits from gas and thermal coal companies.

In a Monday statement, Spender welcomed reports that the government had modelled options for a new tax on fossil fuel exports.

“Since the first week of this conflict, I’ve been calling for an urgent levy on supernormal revenue resulting from war driven price spikes, so I am pleased to see reports that the government is now modelling a windfall tax,” she said.

“We know that the Ukraine war boosted gas export profits but cost Australian consumers and taxpayers billions. A windfall tax would put the budget in a stronger position to respond to the crisis and prepare for the next.”

Spender also called on the government to enact three proposals to strengthen Australia’s energy security including boosting stockpiles, reforming the fuel tax credit to impose price signals to electrify and accelerate electrification to reduce dependence on imported liquid fuels.

“The fact that we are concerned about energy insecurity in a country with Australia’s resources is a consequence of years of energy policy failure,” she said.

“The families who are the most fuel secure right now are those with solar, batteries and electric vehicles.”

Earlier this month (2 March), independent senator David Pocock proposed an inquiry into Australia’s tax settings on gas companies, which he dubbed the “Select Committee on Why Gas Companies Pay Less for Offshore Liquid Natural Gas than Australians Pay in Beer Excise.”

This proposal was shot down in the Senate on 12 March after Labor and the Coalition voted against the Greens, independents and One Nation. However, polling has indicated that gas export taxes are popular nationally, especially amongst One Nation and Greens voters.

A 23 March survey by YouGov, commissioned by the Australia Institute, found that 61 per cent of voters agreed that gas companies should pay a 25 per cent gas export tax. Dr Richard Denniss, co-chief executive of The Australia Institute, echoed Pocock’s concerns about Australia’s taxation settings.

“As petrol and electricity prices rise, the idea that gas export companies will make enormous windfall profits while Australians struggle with higher energy prices and interest rates is as untenable as it is unnecessary,” Denniss said.

“Australians have cottoned onto the fact that beer drinkers pay more in excise than gas exporters pay in Petroleum Resources Rent Tax. They know students pay more in HECS repayments than gas exporters pay in tax.”