Investors in oil and gas companies could get a windfall of more than $2 billion in tax credits under a proposal to cut the corporate tax rate from 35 per cent to 25 per cent, The Independent has learned.
The proposals, expected to be unveiled at a press conference in Sydney later this week, would see the government increase the current rate from 20 per cent up to 25pc and slash the rate on oil companies from 35pc to 25.
The move would help oil and mining companies by providing them with a tax credit of up to $2,000 for each barrel of oil they produce, and the same amount for each tonne of natural gas they release.
It would also see oil and natural gas companies pay a further $500 million towards a fund to support job creation and economic growth.
The proposal was first unveiled in the December budget and was aimed at ensuring companies have enough revenue to offset future costs and boost their tax bills, including those incurred in the past.
Under the proposal, the current 30 per cent tax rate for the oil and mineral exploration industry would be reduced to 20 per and 25 per per cent.
In order to receive the tax credit, companies would have to prove they have a significant number of barrels and tons of oil, and that they produce enough to offset any future tax costs.
That would mean they would also have to demonstrate they have produced enough natural gas to offset costs associated with the gas-fired power plant.
The announcement came as Australia’s largest oil and miner, Glencore, announced it was cutting about 3,000 jobs in Australia, most of them in Victoria.
The company said the move would see it pay $1.3 billion in payroll tax to workers, as well as a further 3,600 temporary staff.
Glencore is one of the biggest companies in Australia.
Its chief executive, Ian Narev, said the company had decided to reduce costs by about $900 million in 2017-18 and $1 billion in 2018-19 to boost its earnings.
“In 2017-19 we saw our gross profit rise $5.5 billion to $8.6 billion, with $1-billion of that coming from higher oil prices and lower natural gas prices,” he said.
Mr Narev said the cuts would be partially offset by a $1 million boost to the pension scheme.
“This was driven by the impact of the recent changes in the retirement age and the reduction in income tax rate,” he added.
Investment tax credits are typically used by companies to boost their return on their investments.
But the proposals are expected to bring an additional $1 trillion in tax revenue into the country over the next 20 years.
A spokeswoman for the department of revenue and corporate affairs said the Government was “looking at all of the factors that are required to make sure the tax system remains efficient and fair”.
“The Department of Revenue and Corporate Affairs is reviewing all of these matters in order to achieve a tax system that delivers on our long-term economic plan,” she said.
“Investment Tax Credit has been around for over 50 years and is a tool that is used by many businesses across Australia, including companies with high levels of investment.”