The Labor party's proposed 25% tax on gas exports aims to ensure Australians receive a fair return from natural resources, addressing a loophole that has allowed LNG giants like Inpex to pay little to no tax. With Australia exporting $52.6 billion more LNG than 25 years ago yet collecting $979 million less in petroleum resource rent tax (PRRT), the reform could fund critical public services. Currently, Australia is the world's second-largest LNG exporter, but the complex PRRT system lets companies offset costs indefinitely, leaving the government with dwindling revenue.
How the PRRT Has Failed Australians
The petroleum resource rent tax was designed in the 1980s to tax oil and gas profits, but it has not kept pace with the LNG boom. While LNG exports soared from 2% to 12% of all goods exported, PRRT revenue dropped 41% in real terms. Much of the problem lies with offshore gas fields, which are royalty-free, and accounting methods that allow companies to deduct massive exploration and development costs. As a result, Japanese giant Inpex, cited by the prime minister as a PRRT success story, has paid zero royalties and zero PRRT despite exporting $195 billion worth of LNG.
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What a 25% Tax on Gas Exports Could Fund
Implementing a straightforward 25% levy on LNG export revenues—as proposed by the ACTU—could generate billions annually. Below is a comparison of current revenue versus potential revenue from a 25% export tax:
| Revenue Source | Current (2025-26 estimate) | With 25% Export Tax (estimated) |
|---|---|---|
| LNG Export Value | $52.6 billion (increase since 2000) | N/A |
| PRRT Collected | $979 million (41% drop) | ~$13 billion (25% of export value) |
| Potential Use for Public Services | Limited | Hospitals, schools, renewable energy, infrastructure |
Key Takeaways
- The PRRT system is broken—companies like Inpex escape taxation despite billions in exports.
- A flat 25% export tax would simplify revenue collection and close loopholes.
- Funds could be redirected to healthcare, education, clean energy, and regional development.
- Australia risks losing its reputation as a reliable energy partner if reforms are not balanced.
Comparing Australia's Tax Regime to Other LNG Exporters
Other major LNG exporters impose higher effective tax rates. For instance, Qatar and the United States capture a larger share of profits through royalties and production-sharing agreements. Australia's unique PRRT model, with its generous cost deductions, has been criticized by economists as a giveaway to multinational corporations. A 25% export tax would align Australia more closely with global norms.
Potential Challenges and Opposition
The gas industry argues that higher taxes could deter investment and reduce competitiveness. However, the ACTU and many Labor MPs counter that the current system has already failed to deliver fair returns. The ALP national conference vote on Thursday will test internal support for this reform. If passed, it could become a key election platform.
FAQ
What is the PRRT?
The Petroleum Resource Rent Tax (PRRT) is a tax on profits from oil and gas projects in Australia, introduced in the 1980s. It is designed to ensure the community benefits from resource extraction, but loopholes allow companies to defer or avoid paying.
Why does Inpex pay no tax?
Inpex, the Japanese operator of the Ichthys LNG project, has used extensive cost deductions and accounting allowances under the PRRT to report zero taxable profits, despite exporting $195 billion worth of LNG. The company also benefits from royalty-free offshore gas.
Would a 25% export tax affect domestic gas prices?
The proposed tax applies to exports only, not domestic sales. In theory, it should not directly raise local gas prices, but the industry warns it could reduce investment and future supply, potentially impacting prices in the long term.
What is the ACTU's role in this proposal?
The Australian Council of Trade Unions (ACTU) first proposed the 25% export tax as a way to boost government revenue and fund public services. The ALP conference will vote on whether to adopt this policy into the party platform.
As the ALP national conference approaches, the debate over taxing gas exports intensifies. A 25% tax on gas exports could reshape Australia's resource taxation, delivering billions for public goods while ensuring multinationals pay their fair share. Whether the party unites behind this reform remains to be seen, but the pressure is clearly mounting.