Greens just wanna tax gas
Gas companies posting record profits while paying little tax looks like an open goal — but the mechanism behind those low bills matters more than the Greens want to admit.
When a gas company reports billions in quarterly revenue and pays relatively little tax on it, the instinct to reach for the tax code is understandable. The Australian Greens are pushing for a minimum 25 per cent gas export levy, citing Woodside's quarterly revenue surging 28 per cent to $6 billion and Shell posting $13.9 billion in quarterly profit. Senator Steph Hodgins-May says Labor should stop overcomplicating it. The problem is that the complication she wants to wave away is the part that actually matters.
Why gas companies show modest tax bills on large revenues
The reason gas companies pay modest tax relative to their revenues is not primarily secrecy, legal engineering, or donations buying policy outcomes — though the Greens are happy to imply all three. It is that the Australian tax system, like tax systems in every comparable gas-producing economy, allows capital expenditure to be deducted against income. Gas projects require extraordinary upfront capital: platforms, pipelines, liquefaction trains, processing facilities. These investments run to tens of billions of dollars and take years before any revenue flows. The deductions work through the system over time, which is why a company can report large revenue figures while showing modest taxable income. The tax will be paid eventually. The question is when, and under what rules.
A minimum levy changes the investment calculation before capital is recovered
This matters enormously for what the Greens' proposal would actually do. A new minimum tax, applied before capital costs are fully recovered, does not simply redirect money from shareholders to the public. It changes the calculation that companies make before they commit the next round of capital. If the expected after-tax return on a $20 billion LNG investment falls below the threshold at which it makes sense to proceed, that investment does not happen. The tax revenue that would have flowed from it does not happen either. Nor does the employment, the supply chain activity, or the domestic gas production that comes alongside export volumes.
Gas companies posting record revenues during a period of war-driven global price spikes will always generate political pressure to capture more of that upside for the public. The question worth asking is whether the tool being reached for is calibrated to do that, or whether it is calibrated to win a Senate vote and a news cycle while quietly discouraging the next $20 billion from being committed to Australian soil.
This is not a hypothetical chain of events. Australia already has documented experience with what happens when policy uncertainty and regulatory intervention reduce the expected return on gas investment. Price controls and export caps introduced in recent years reduced the incentive to develop new supply, and the Centre for Independent Studies found that this pressure left Australia, a major gas exporter, facing domestic gas shortages and elevated household prices. The intervention designed to help consumers contributed to the supply tightness that hurt them. The mechanism is not complicated: reduce the return on investment and you reduce the investment.
Polling tells you about salience, not about whether a policy works
The Greens' argument leans on the polling figure that seven in ten Australians support a gas export tax. That may well be true. It is also true that most people responding to a poll about whether large companies should pay more tax do not have the deductibility structure of Australian petroleum resource rent arrangements in front of them. Popular support for a policy tells you something about political salience. It tells you nothing about whether the policy will produce the outcome the supporter imagines.
Norway's model is almost the opposite of what the Greens are proposing
There is a legitimate debate to be had about whether Australia extracts sufficient return from its gas resources over the long run. We have previously examined the argument that higher tax burdens on gas producers tend to deter the capital formation that generates future revenue, and the evidence from comparable economies is not kind to the simple extraction thesis. Norway's petroleum tax regime, often cited as the model to emulate, is specifically designed to preserve investment incentives while capturing resource rents, with full expensing of capital and a refund mechanism for explorers. It is almost the opposite of a blunt minimum levy applied to export revenues.
Labor's hesitation is not obviously donor capture
The political framing the Greens have chosen — Labor votes with gas corporations or with the Australian people — is effective communication. It is also analytically empty. Labor's reluctance to pass a minimum export tax is not obviously donor capture. It may reflect the same reading of the investment incentive literature that makes most resource economists cautious about blunt revenue-based levies. That case should be made explicitly rather than hidden behind procedural hesitation, but the hesitation itself is not without basis.
Gas companies posting record revenues during a period of war-driven global price spikes will always generate political pressure to capture more of that upside for the public. The question worth asking is whether the tool being reached for is calibrated to do that, or whether it is calibrated to win a Senate vote and a news cycle while quietly discouraging the next $20 billion from being committed to Australian soil. Those are different things, and the difference is what the complication is actually about.
Sources
Australian Greens — Greens to force another vote on gas export tax as gas giants rake in billions
The Bearing — Gas tax is all hot air
The Bearing — Rent caps save renters money if you ignore all flow-on effects
Frequently Asked Questions
Why do Australian gas companies pay so little tax if they're making billions?
Gas projects require tens of billions of dollars in upfront capital — platforms, pipelines, liquefaction facilities — before any revenue flows. The tax system allows those costs to be deducted against income over time, which is why a company can report large revenues while showing modest taxable income in a given year. The tax is deferred, not avoided.
What would a 25 per cent gas export tax actually do?
A minimum levy applied to export revenues before capital costs are fully recovered changes the investment calculation companies make before committing to the next major project. If the expected after-tax return on a multi-billion-dollar LNG investment falls below the threshold needed to proceed, that investment — and the tax revenue, jobs, and domestic supply it would have generated — does not happen.
Didn't Norway make its gas tax work? Why can't Australia do the same?
Norway's petroleum tax regime taxes profit, not revenue, and includes full expensing of capital costs plus a refund mechanism for explorers — specifically designed to preserve investment incentives while capturing resource rents. The Greens' proposed levy is a blunt minimum tax on export revenues, which is structurally almost the opposite of the Norwegian model they often invoke.
Why won't Labor just pass the gas export tax if 70 per cent of Australians support it?
Popular support for taxing large companies tells you about political salience, not about whether the policy produces the outcome supporters imagine. Labor's hesitation likely reflects concern that a revenue-based minimum levy would deter the next round of capital investment, shrinking the long-run tax base rather than growing it — though that case has not been made publicly with enough clarity.
Did Australia's gas price controls actually make things worse for consumers?
Price controls and export caps introduced in recent years reduced the incentive to develop new gas supply. Research found this left Australia — a major gas exporter — facing domestic gas shortages and elevated household prices, meaning the intervention designed to help consumers contributed to the supply tightness that hurt them.