The former Treasury secretary Ken Henry says “self-serving” claims from gas giants about the risks of windfall profits and export taxes should be ignored by the Albanese government as it weighs up the intervention ahead of next month’s federal budget.
In a submission to a new parliamentary inquiry examining the gas taxation regime, Henry made the case for a 100% windfall profits tax as he rejected the assertion that any changes would heighten perceptions of Australia as a sovereign risk and freeze investment in new projects.
“Any proposal to generate more tax revenue from windfall gains accruing to foreign owners of capital will draw self-serving criticism from those supplying the capital, for the most part, the CEOs of multinational corporations,” he wrote.
“Any investment proposal that at least meets its cost of capital in the absence of a windfall gains tax, or any of the other options for taxing supernormal profits, will still do so in the presence of such a tax. For those with an understanding of economics, this is merely a tautology.”
Sign up for the Breaking News Australia emailHenry was the author of the 2010 review that recommended the then Rudd government introduce a 40% mining super profits tax.
In his submission, he argued that the justification for the short-lived super profits tax – which was watered-down by Julia Gillard and abolished under Tony Abbott – still existed 16 years on.
Windfall gains are large and sudden increases in profits often caused by external factors, such as a conflict. The gas companies, for example, experienced a surge in revenue after Russia’s illegal invasion of Ukraine in 2022 sent global prices spiralling.
Henry said the “socially optimal” rate for a windfall profits tax was “approximately” 100%, suggesting the revenue could be invested in a sovereign wealth fund, used to fund nature repair and reform personal income and corporate taxes.
“Since the burning of fossil fuels has been a major, and increasing, cause of nature loss, there is a strong case for using some of the proceeds of a windfall gains tax to undertake nature repair,” he said.
The federal government is under growing pressure from Labor-aligned trade unions and crossbenchers, among others, to introduce a flat 25% tax on gas exports, which the Australia Institute thinktank estimates could raise $17bn a year.
Revelations last month that the Treasury was modelling a windfall profits tax and changes to the petroleum resource rent tax (PRRT) fuelled speculation the government was poised to use the budget on 12 May to extract more revenue from gas producers.
While the government has not ruled out changes, the appetite for major interventions appears to have diminished amid the global energy crisis sparked by the Iran war.
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