Structural Limits to Resource Rent Taxation: Evidence from Australia's LNG Industry (Nassios, 2026)

Summary

"Structural Limits to Resource Rent Taxation: Evidence from Australia's LNG Industry," by Jason Nassios, is Centre of Policy Studies Working Paper No. G-372 (Victoria University). It extends the wiki's existing Australian mining royalties and PRRT coverage with a focused diagnosis of why the Petroleum Resource Rent Tax underperforms specifically in Australia's liquefied natural gas (LNG) sector, despite Australia being one of the world's largest LNG exporters through a period of strong price growth, including the post-2022 gas-price spike.

Two Structural Mechanisms

The paper identifies two mechanisms, not the statutory rate, as the primary cause of low PRRT collections. First, tax base measurement: "gas transfer prices used to value upstream sales are not publicly observed," so the price on which the tax base depends is set through an administratively contested, largely unobservable process (the Residual Pricing Method). Second, intertemporal deferral: "large upfront capital expenditures generate carried-forward deductions that are uplifted over time, delaying the recognition of taxable rents" — a stylized example in the paper shows A$10 billion in development costs, uplifted at 10% per year, growing to roughly A$25.9 billion in carried-forward deductions after ten years, deferring recognized taxable rent for decades. The paper documents PRRT revenue rising only from A$1.5 billion (2014) to A$2.3 billion (2023), while a resource-depletion-based rent proxy rose from roughly A$4.6 billion to A$18.1 billion over the same period — an effective PRRT/rent capture rate of roughly 15%, against an inferred ~48% for Norway's comparable regime.

Norway Comparison and Reform Options

Norway's petroleum fiscal regime combines a 22% ordinary company tax with a 56% petroleum tax surcharge (roughly 78% combined marginal rate), plus direct state equity participation via Equinor and a sovereign wealth fund — against Australia's PRRT-plus-company-tax combination with minimal direct state ownership and no dedicated resource wealth fund. The paper ranks five reform options on efficacy, neutrality, administrative complexity, sovereign risk, and transitional fairness: state equity participation and a price-sensitive, LNG-targeted instrument (effectively a full-project cash-flow tax) score highest on structural efficacy; simply raising the PRRT rate scores highest on ease of implementation but, the paper concludes, does not fix the underlying structural problem — "incremental reforms such as increasing the statutory tax rate are unlikely to materially improve rent capture."

Relation to the Georgist Case

This is a rigorous, directly applicable extension of the wiki's resource rents design literature: it demonstrates, with real Australian data, that a nominally well-designed cash-flow-style resource rent tax (PRRT, per the wiki's cash-flow tax family of instruments) can still leave most of the rent uncaptured if its base-measurement and deduction-timing rules are exploitable — echoing, in a different sector, the base-broadening-beats-rate-increases lesson the wiki's corporate-tax rent-capture literature already documents.

Nuances and Limits

• A working paper, not yet peer-reviewed.
• Australia/LNG-specific. The transfer-pricing and uplift-deferral mechanisms are specific to PRRT's design; the general lesson (base design matters more than the rate) generalizes, but the specific figures do not automatically transfer to other resource-tax regimes.
• Full text read directly, independently confirmed by two separate readings (A-claim). The complete 33-page working paper was read in full.

Bears On

• Research: Australia's Mining Royalties and PRRT — this paper's LNG-specific structural diagnosis extends and updates the wiki's existing PRRT coverage.
• Concept: Resource Rents — a concrete demonstration that base design and deduction timing, not the statutory rate, determine how much rent a tax actually captures.
• Concept: Cash-Flow Tax — PRRT is a sectoral cash-flow-style rent tax; this paper shows how its specific implementation choices can undermine the design's theoretical rent-only base.

See Also

• Australia's Mining Royalties and PRRT
• Resource Rents
• Cash-Flow Tax
• Tarras-Wahlberg & Uggla: A Golden Limit to Neo-Extractivism in Bolivia

Sources

1. Jason Nassios (2026), "Structural Limits to Resource Rent Taxation: Evidence from Australia's LNG Industry," Centre of Policy Studies Working Paper No. G-372, Victoria University. Full text read directly at copsmodels.com/ftp/workpapr/g-372.pdf 2026-08-29 (independently confirmed via two separate full readings) — used for the transfer-pricing and deduction-deferral mechanisms, the A$1.5bn→A$2.3bn PRRT revenue and A$4.6bn→A$18.1bn rent-proxy figures, the stylized A$10bn/A$25.9bn uplift example, the Norway comparison (22%/56%/~78% rates, Equinor state equity), and the five-option reform ranking (A-claim; full text, 33 pages).