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Why a 25% LNG export tax would backfire (Op Ed in Capital Brief)

Press/Media: Expert Comment

Description

Authored opinion piece arguing against proposals for a flat 25 per cent LNG export tax, on the grounds that a revenue-based levy taxes volume rather than value and therefore bears hardest on marginal projects during weak market conditions. Accepts the legitimacy of concerns about returns from the Petroleum Resource Rent Tax while arguing that its shortcomings — uplift rate compounding, transfer pricing in markets without transparent benchmarks, and the simultaneous approval of multiple capital-intensive projects — are design and enforcement problems properly addressed through targeted reform rather than replacement of the tax base. Rejects the Norwegian comparison frequently invoked by export tax advocates, noting that Norway's 78 per cent headline rate operates within a system of extensive state ownership and loss refundability under which the state shares downside risk, an arrangement without an Australian equivalent.

Subject

LNG export taxation, Petroleum Resource Rent Tax reform, and the trade-off between fiscal return and gas supply investment in Australia.

Period5 May 2026

Media contributions

1

Media contributions

  • TitleWhy a 25% LNG export tax would backfire (Op Ed in Capital Brief)
    Degree of recognitionNational
    Media name/outletCapital Brief
    Media typeWeb
    Country/TerritoryAustralia
    Date5/05/26
    DescriptionThis opinion piece argues that a flat 25 per cent LNG export tax, while politically appealing, would be economically counterproductive and strategically risky. Its central objection is structural: a revenue-based levy taxes turnover rather than profit, applying equally to profitable, marginal and loss-making projects, and therefore bearing hardest precisely when market conditions are weakest — a dynamic that eliminates marginal supply while leaving the largest operators intact. The argument situates this against declining legacy fields and AEMO warnings that new supply decisions must be taken now to secure affordable energy later in the decade, and against intensifying global competition from Qatari expansion beyond 120 million tonnes, continued US capacity growth, and prospective pipeline supply into Asia — conditions under which buyers gain leverage and higher-cost producers are pressured first. It rejects the Norwegian precedent commonly cited by levy advocates, noting that Norway's headline rate operates within a system of state ownership, rapid approvals and loss refundability under which the state absorbs downside risk, whereas Australian LNG has been built on private capital bearing full commercial risk. The piece accepts as legitimate the concern that the PRRT has underdelivered, attributing this to the simultaneous approval of multiple megaprojects with deductible construction losses, alongside genuine integrity issues in uplift rates and transfer pricing where absent domestic benchmarks complicate arm's-length assessment. It argues these are enforcement and design problems addressed by recent reforms — deduction caps, reduced uplift rates and strengthened ATO scrutiny — and concludes that where fairness is the objective, profit remains the correct tax base.
    Producer/AuthorLurion de Mello
    URLhttps://www.capitalbrief.com/article/why-a-25-lng-export-tax-would-backfire-96293542-9a8c-4b25-9e49-064da3df5dc4/
    PersonsLurion De Mello
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