Labor to vote on potential new tax which could raise enough for free uni or dental in Medicare

The Labor Party is on the verge of deciding whether it will support a gas export tax that economists say could generate enough money to fund dental in Medicare or free university for every Australian.

Labor figures will debate whether to give Australians a “fairer return from their natural resources including through appropriate taxation arrangements” at the party’s 50th annual conference which begins on Thursday, as momentum grows to charge gas companies on their exports.

Economists estimate introducing a 25 per cent gas exports tax could raise between $4 billion and $17 billion each year.

Greg Jericho, chief economist at the Australian Institute, which has been pushing for such a tax, called for the government to use the changing tide in public opinion to act now before the industry declines.

The energy market operator forecasts international gas demand to fall by 40 per cent by 2045 due to changing habits and renewables.

“We estimated it to raise about $17 billion a year, and that provides a massive opportunity for Australia to really benefit from a gas boom that is not going to be around forever,” he said.

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“Right now, gas companies are making billions, and Australians are really getting very little in return.”

Jericho said the estimated revenue from a gas export tax could fund dental in Medicare or free childcare, university and TAFE for every Australian.

“It could fund a massive change in Australia’s society,” he said.

“You often hear the government saying, ‘Oh, we can’t afford to do these things. We can’t afford to fund this, or we can’t. We’d love to put free childcare, but we can’t afford it.’

“Well, actually, they could afford it. They’ve just chosen not to tax the gas properly.”

AMP economist My Bui had a more modest tax revenue forecast of $4 billion a year, but said that could still fund what would be a well-supported policy proposal: income tax cuts.

“It can be used to pay to reduce taxes in other areas,” she said.

“Income earners in Australia – basically middle Australia – is actually quite highly taxed.

“Those are just wage earners, and over the years we haven’t had really a lot of tax cuts...

“To raise gas tax, you can cut tax in other areas, and it is quite necessary because I think it does change people’s behaviour, and it can actually be used as a tool to push up our productivity growth, which has been quite stagnant.

“So it is not a bad time.”

Australia is the world’s second-largest exporter of gas but only taxes companies through the 40 per cent profits-based Petroleum Resource Rent Tax (PRRT).

But the design of the PRRT means companies do not always have to pay.

Independent MP David Pocock has helped lead the campaign to tax gas exports following a Senate exchange which outlined that Australians pay more yearly tax on beer – about $2.7 billion – than gas companies do under the PRRT – about $1.5 billion.

Former Labor leader Bill Shorten previously declared the “time has arrived” to review the current gas tax system, telling the ABC there is a national appetite for change.

Labor’s vote on Thursday will decide whether to make a fairer return on natural resources part of its national platform, which could inform policy decisions ahead of the next federal election.

If the government does decide to capitalise on growing public sentiment, a gas export tax would sail through parliament with the support of the Greens and other crossbenchers like Pocock.

Labor MP Ed Husic, one of the backbenchers pushing for the gas tax, told reporters outside the conference on Thursday the party needs to show it has the “steel in the spine” to make a call in the public’s long-term interest.

“A lot of Australians reckon we’ve been ripped off. Labor can stand up, seize this moment, seize the money, also seize the agenda long term,” he said.

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Opposition Leader Angus Taylor on Wednesday said Australia should make the most of its natural resources, but said the way to do that was through drilling for more gas.

“We should be using our natural resources to get the cost of energy down in this country, to get industry back to this country, to prevent industry going offshore in this country,” he said.

“We need to get more gas out from under the ground.”

In April, research firm Wood Mackenzie published a report that said imposing an additional 25 per cent tax on the country’s oil and gas industry would make new projects uninvestable and drive investment offshore.

Samantha McCulloch, chief executive of lobby group Australian Energy Producers, said the report backed up warnings that it would hurt the industry.

“The consequences are clear — less investment, less supply, and higher energy costs for Australian households and businesses,” McCulloch said.