Libertarianism and Taxation

Chapter 5 discusses the implications of libertarianism for just taxation. Libertarianism holds that agents fully own themselves and have certain moral powers to appropriate natural or abandoned resources. Some versions of libertarianism preclude the possibility of just taxation, but the author claims that other versions can, under very limited circumstances, endorse two kinds of taxes as just: taxes on right-infringers for the cost of rights-enforcement and taxes on anyone with an excess share of the value ownership rights over natural resources. Other kinds of taxation, such as income taxes, human resource (talents) taxes, and artifactual resource taxation are not just on any version of libertarianism.

Shining the spotlight on the petroleum resource rent tax

The petroleum resource rent tax (PRRT), a 40% profits-based upstream tax that applies to Australian oil and gas projects, has come under significant scrutiny as to its effectiveness in providing an appropriate return to the community for the exploitation of Australia’s petroleum resources. The April 2017 independent Callaghan review into the design and operation of the PRRT found that it remained the preferred way of achieving a fair return to the community from petroleum exploration and recovery, without discouraging investment into the sector. However, the Callaghan review recommended possible changes to the regime to improve its sustainability and compatibility with the current state of the industry, while ensuring fiscal stability for existing investments. In response to the findings and recommendations of the Callaghan review, Australian Treasury embarked on a consultation process to investigate potential reform options to the PRRT. Government has yet to announce its decision on the way forward. What the future holds for the PRRT and the consequential impact on existing and new or proposed projects remain to be seen pending the Government’s chosen policy direction. This paper covers the following: • a survey of the economic rent theory underpinning the framework of the PRRT regime, including its pros and cons compared with other forms of resource taxation • a review of key recent developments in the administration and interpretation of the PRRT law, and • how the PRRT regime is anticipated to change and the associated repercussions on the after-tax economics and practical compliance for existing and future projects.