21 Apr 2023

Transcript: APPEA Chief Executive Samantha McCulloch is interviewed on Sky News AM Agenda about industry tax contribution

Laura Jayes: The oil and gas industry says it’s set to almost triple its tax payments to governments compared with last financial year. Companies are forecast to pay $16 billion in windfall taxes, excise and royalties. This is up from $6 billion in the year prior. The jump in the government contributions is largely being fuelled by a rise in income tax from record LNG exports and heightened commodity prices. $1.85 billion is being collected under the Government’s Petroleum Resources Rent regime, which is set for a shake up in the Budget. Joining me now is Samantha McCulloch, the Chief Executive of the Australian Petroleum Production & Exploration Association. We’ll just call you APPEA. Sam good to see you once again. Why are you pointing this out ahead of the Budget – are you just worried you’re going to see a seriously big hike in the taxes you’ve got to pay?

Samantha McCulloch: Hi Laura, thanks so much for having us today. Look, I think our latest Financial Survey results really highlight the contribution of the oil and gas industry directly into government revenues. This is great news for Budgets around Australia. The contribution of the oil and gas industry will almost triple – $16 billion in revenue for government budgets. It really does underscore the strong demand we are seeing for commodity exports including LNG is really translating to benefits directly for Australians.

Jayes: OK. So if the industry is paying $16 billion to governments in excise, royalties and tax. That must mean these companies are making extraordinary profits, though?

McCulloch: Well, we have seen strong demand, as I said, for LNG exports recently and there has been higher prices internationally. This is a result of the global energy crisis triggered by Russia’s invasion of Ukraine and there has been pressure on international prices. I would underscore that the international prices we are seeing are not the prices being paid by Australian domestic consumers. But it does show that the demand for our commodity exports is there and the work and investments of the oil and gas industry is translating into benefits for Australian communities and Budgets. The $16 billion that will be raised from the oil and gas industry this year – that’s sufficient to fund 11 new hospitals. It could fund 160 new schools or support public health services for 1.6 million Australians.

Jayes: Sure, but if you’re getting extraordinary profits essentially from the overseas market – Australians aren’t paying those prices – the argument is why shouldn’t Australians, given it’s their resource, get a bigger share of the pie?

McCulloch: I think the figures we released today show that contribution of the oil and gas industry is growing. It’s tripling because of those high international prices we have seen for Australia’s commodities. This is really good news for Australians. It’s good news for governments, particularly at a time where there are some challenges for government revenue. The industry is contributing to easing some of those pressures for government budgets.

Jayes: So have you had discussions with the Treasurer in the lead up to the Budget. What is the likelihood you are going to see another tax increase on profits?

McCulloch: We’ve been in consultations with the Treasury and Treasurer’s office for several months now. We understand the Government has some budgetary imperatives but in the case of the PRRT this regime has been reviewed four times since 2017. The government estimates the PRRT will raise around $11 billion over the forward estimates period. It’s a tax that is currently working as it’s intended and it’s really only one part of the industry’s contribution to the Australian economy. We’ve already discussed the direct contributions through taxation and royalties. But, of course, the industry is also spending – and is expecting to spend more than $40 billion this year on goods and services from Australian companies. We employ 80,000 Australians, including in regional areas. So there is a much broader contribution from the industry that we need to recognise. We would certainly urge the government to be taking a longer term perspective when looking at taxation changes to ensure this broad economic contribution of the industry can continue over the long term.

Jayes: Is that a veiled threat- what is your message this morning: is it that you already pay enough tax, if you have to pay more, than investment might slow down?

McCulloch: We’re already seeing challenges for investment in Australia for oil and gas, Laura. This is the latest in terms of the proposed changes to the operating regime for oil and gas companies. Oil and gas companies have invested $400 billion in Australia since 2010. To have capital investment of this scale, you need policy certainty and stability. What we’ve seen over recent months is a raft of interventions and changes that have undermined that investment confidence. It’s made it very difficult to raise finance. We have the investment community and bankers raising concerns about the investment environment in Australia and we’ve had our valued trading partners raise concerns around the investment opportunity in Australia. So what we want to see is that policy stability and certainty, and certainly avoiding retrospective changes, to ensure that the new investment that is absolutely needed can go ahead. This is at a time when we have the AEMO and the ACCC warning of shortfalls of gas supply in the domestic market. So we need to ensure we have got the settings there to encourage that new supply to come online.

Jayes: So if there is a new tax or an increase in the PRRT. Will that supply dry up or will it strangle that supply do you think?

McCulloch: We don’t have the final details of what might be in the budget. But we really need to look at the accumulative impact of the interventions that we have seen across the gas market in recent months, even delays we see now to environmental approvals that add millions of dollars a day of costs to these projects. It’s important that we can have the stability for the industry to move forward, to invest, to contribute including for the government’s own prerogatives: we want to be a country that makes things, we want to grow our manufacturing sector. That requires gas and gas is ready to be that important partner for our manufacturing sector. But we need again, certainty and stability in the policy settings to encourage what are very large capital investments.

Jayes: OK, Sam, thanks so much. We will speak to you after the Budget. See how that goes…

McCulloch: Thanks, Laura.