Australia Institute Research: 25% Gas Export Tax Could Generate $17 Billion Yearly for Essential Services

The Australia Institute's Bold Proposal: A 25% Tax on Gas Exports

Australia stands as one of the world's top liquefied natural gas (LNG) exporters, shipping out massive volumes to markets in Asia and beyond. Yet, despite this wealth-generating industry, domestic households and businesses grapple with soaring energy bills, while government coffers see minimal returns. Enter the Australia Institute, a leading independent think tank, with groundbreaking research that spotlights a simple yet transformative fix: a flat 25% tax on the value of gas exports. Their modeling projects this could haul in a staggering $17 billion annually—enough to supercharge funding for health, aged care, housing, and more essential services Australians desperately need. 82 71

This isn't just theory. The research underscores how current tax arrangements leave billions on the table, with gas giants pocketing windfall profits amid global tensions. As Dr. Richard Denniss, co-CEO of the Australia Institute, puts it, "We only get to sell our natural resources once, and when governments fail to secure a fair return, we all miss out." The proposal has ignited national debate, especially as Prime Minister Anthony Albanese tasks Treasury with modeling similar windfall taxes amid Middle East conflicts driving up prices. 70

Understanding Australia's Gas Export Boom and Tax Shortfall

Liquefied natural gas, or LNG, involves cooling natural gas to -162°C for shipping. Australia produces around 85 million tonnes per annum (mtpa), making it the largest exporter globally ahead of Qatar and the US. In recent years, export values have skyrocketed: $265 billion over four years to June 2024 alone. High global demand, fueled by post-Ukraine war shortages and now Iran-related disruptions, has pushed spot prices to premiums, benefiting exporters like Woodside and Santos. 52

But here's the rub: taxation. The Petroleum Resource Rent Tax (PRRT)—a profits-based levy introduced in 1987—has proven woefully inadequate. Companies deduct massive costs: exploration carried forward indefinitely, marketing expenses abroad, even uplift allowances. Result? PRRT payments hit three-year lows. Over $170 billion in exports paid zero royalties and zero PRRT in four years. Nurses pay more income tax than the entire industry in PRRT. Australians fork out four times more in HECS/HELP repayments than gas PRRT revenue. 71 69

Offshore fields (most exports) pay no state royalties—over half exported royalty-free. Compare to onshore mining: full royalties plus company tax. The Domestic Gas Security Mechanism exists, mandating 15% for local use, but enforcement is lax amid shortages.

How the 25% Export Tax Would Work

Simple: levy 25% on gross revenue from gas exports, akin to Norway's or Qatar's systems. No deductions for costs—just the sale value at the border. ACTU first floated it; Australia Institute crunched numbers using government data on volumes and prices.

• 2023-24 projection: $17.1 billion. 60
• At current war-boosted prices: even higher, potentially $20b+.
• Retrospective: From July 2022, $63.8 billion by now. 62

Implementation: Amend tax laws via legislation, passable with Greens support. Funds ringfenced? No, straight to budget for priorities. Incentivizes domestic sales: tax only exports, so cheaper local gas prioritized.

Public Backlash Against the Status Quo: Polling Insights

Australia Institute commissioned RedBridge Group polls (2,010 respondents): 61% nationwide support for "Gas export corporations should pay a flat 25% tax on gas exports." Cross-party: Greens 92%, Labor/Teal 72%, Coalition 50%, One Nation 58%. Five separate polls confirm overwhelming consensus. 82

"Australians from all walks of life... believe the country is not receiving a fair deal," Denniss noted. Petition at Australia Institute gains traction. 47

Transformative Funding for Essential Services

$17b/year dwarfs current spends:

• Quadruple housing affordability investments ($4b now).
• Boost aged care ($12b gap).
• Fund health waitlists, renewables transition.
• Low/Middle Income Tax Offset expansion ($12b).

Lowering Domestic Gas Prices: The Incentive Effect

Export tax flips economics: firms sell locally (no tax) vs export (25% hit). Ends 'gas crisis'—shortages despite reserves. Recent war premiums: exporters gain $10b+ extra, locals pay more. Tax claws back, stabilizes prices. 43

Grattan Institute echoes: windfall tax needed amid shocks.

Industry Pushback: Myths vs Facts

Australian Pipelines & Gas Association (APGA): tax deters investment, cuts supply. Australia Institute counters: Norway taxes 78%, invests more; tax on revenue, not profit—predictable. No inflation risk: lowers input costs. Exports shrinking anyway (Qatar expanding). 20

Government's Cautious Stance Amid Global Chaos

Albanese: Treasury modeling windfall tax post-Iran strikes. Energy Minister Bowen open, but stable policy mantra. Greens/Pocock demand 25%; ACTU pushes. Missed $63b since 2022 haunts. 72

International Benchmarks: Learning from Leaders

Norway: 78% tax, $200b+ fund. Qatar: royalties + corp tax. US: state severances. Australia lags, PRRT loopholes galore.

Path Forward: From Research to Reform

As gas bridges to net-zero, fair taxation ensures transition benefits all. Petition, polls pressure: time to tax exports, invest in future. $17b awaits.

Photo by Vlad Kutepov on Unsplash