Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I move:

That the Senate take note of the document.

It is extraordinary that in a week where we are still squabbling over tens of millions of dollars in revenue raising from backpackers, some of the lowest-paid workers in this country, the Australian National Audit Office releases a bombshell report—and I do recommend that all senators read it—saying that oil and gas companies may have wrongly claimed billions of dollars in tax deductions and therefore robbed the Australian people and this government, in its obsession with balancing budgets and deficit repair, of hundreds of millions if not billions of dollars in revenue.

Report No. 28 of 2016-17—Performance audit: collection of North West Shelf royalty revenue: Department of Industry, Innovation and Sciencefinds that oil and gas companies using loopholes may have wrongly claimed up to $5 billion in deductions. It has found that the royalty formula has not been reviewed on these deductions for nearly 17 years and that a number of deductions, worth billions of dollars, claimed by companies, are not allowable under the act. This is something I have asked the Australian Taxation Office and the Treasury about several times. In fact, at the last three estimates I have asked about exactly these issues—about what is and is not allowable. It really shows you where this government's priorities are. The government is not prepared to look at this low-hanging fruit—what is essentially multinational tax avoidance. Instead, it wants to chase some of the lowest-paid workers in this country, foreign backpackers, who are here to have a holiday and pitch in and help our local agricultural producers, who desperately need their labour. The government is prepared to put our local agricultural production at risk to save a few pennies for Scott Morrison's obsession with budget repair. The issues raised in this report have been raised so many times, yet nothing is ever done about it.

The report shows that more than $5 billion worth of deductions were claimed against petroleum revenues just in the 18 months to December 2015. These deductions were claimed under the broad categories of operating costs, depreciation, costs of capital, depreciated asset disposal, crude oil excise, condensate excise, processing tariffs and joint venture participation costs. Any costs that are claimed as deductions—for example, by North West Shelf operators—reduce the amount of royalty that is payable to the Australian people. The federal Department of Industry, Innovation and Science relies on the Western Australian Department of Mines and Petroleum's, or DMP's, compliance work and does not undertake any further activities to gain assurance that only eligible deductions have been claimed. So, in this instance we rely on the Western Australian government to do limited audits, and the Australian government has provided no oversight.

The royalty scheme does not permit all the deductions currently being claimed. On this basis, ANAO has doubts about the eligibility of deductions claimed for the costs of debt- and equity-funded capital, excise paid on crude oil and excise paid on condensate. The ANAO also found that there has not been adequate scrutiny of claimed deductions. Specifically, as I mentioned before, it has been 17 years since there has been an audit of North West Shelf operators and how they can actually pay a royalty and do their calculations. There have been recent reviews by DMP of cost reductions, but this work has involved quite limited testing, and there has been no major comprehensive examination since 2006. The limited work that has been undertaken has nevertheless highlighted potential problem areas, which I would urge senators to consider, but little action has been taken in response to these findings.

More recently, the Western Australian government commissioned consultants to undertake some data analysis procedures on capital and operating expenditure by North West Shelf producers that were also quite limited in scope has also provided some valuable insights. The report's findings indicate that there is a risk of significant errors in the claiming of deductions. To date there has been an agreement that a net amount of $8.6 million in royalties has been underpaid, requiring adjustments, but this is just the tip of the iceberg.

To put it in a nutshell, to finish off, I question our priorities. We are going after backpackers, who earn on average $14,000 a year. The companies in this report earn billions of dollars. They are some of the biggest companies in the world, operating in the North West Shelf. And it is clear that the rules, the way they are written at the moment, allow these companies to make tax deductions that they should not be making. That is money we need for schools, hospitals and policing in this country. The Greens will be taking this a lot further and putting this issue under the microscope.