“How do we live in a country, one of the biggest gas exporters in the world, and we’re getting more tax from beer?” This question, posed in an Australian senate hearing by independent politician David Pocock in February 2026, went viral on social media. It helped bring to the forefront long-running frustrations with the failure of the Australian government to collect substantive levels of revenue from the exploitation of the country’s vast gas reserves.

Despite being one of the largest exporters of gas in the world, Australia appears to have relatively little to show for it. In the words of the Australia Institute’s Mark Ogge, the gas industry in Australia “employs virtually no one, and gets the gas for free, and pays virtually no tax”.

GNV has in many articles explored how the bulk of wealth from mineral reserves in many low-income countries is siphoned off largely untaxed by powerful foreign corporations. To a degree, this state of affairs reflects a lack of bargaining power that is in part linked to a lack of economic alternatives in those countries. But such exploitation at the expense of the country that possesses mineral wealth is certainly not limited to low-income countries. This article will look at how and why the wealth from massive reserves of gas in Australia appear to be leaving the country.

LNG tanker moored in the Northern Territory (Photo: Ken Hodge / Wikimedia Commons [CC BY 2.0]）

Gas extraction, taxes, and royalties

Companies that extract and export gas and other fossil fuels are required by the government of the country in which the resources are buried to pay taxes and/or make other forms of payments in some form on the revenue generated by their business activities. But the basis for taxation and the amounts due can be complex and depends greatly on the country in which the activity is taking place. Some relatively standard forms of taxation on gas that are implemented around the world are outlined below.

We can begin with corporate income tax, which is applied to profits made by the corporation. Just like any other corporation dealing with goods and services, companies that extract gas would be expected to pay a certain percentage on the profits their activities generate.

But the business of extracting and exporting gas is fundamentally different from a business that operates a factory, or a supermarket, for example. A business that manufactures fruit juice, for example, needs to purchase the fruit it uses to make the juice, and a supermarket needs to buy the items it puts on its shelves. Gas, on the other hand, is not a good or raw material that is ‘produced’ by, or bought from, another business. It is a natural endowment under the jurisdiction of the country in which it is found – a non-renewable resource owned by the public of that country.

As such, governments typically implement schemes that allow the country to ‘sell’ this finite resources to companies that wish to extract it. This often takes the form of royalties, which are not related to profits, but are a payment to the government based on a percentage of the volume of the resource extracted. Governments may also charge signature or discovery bonuses, which are related to the exploration for resources, and rental fees for the use of the territory where exploration and production takes place.

Another consideration is that the market price of resources such as gas can fluctuate greatly due to shifts in supply and demand. A corporation extracting gas can, for example, suddenly find itself generating massive profits, not because of any change in their activities, but because of changing market forces. War over over Ukraine and Iran, for example, caused a sharp rise in the price of gas worldwide. To allow the country in which the resources are extracted to adequately benefit from such rises, governments may implement windfall taxes, which are triggered when market prices exceed a certain value.

Gas stove (Photo: Focal Foto / Flickr [CC BY-NC 2.0]）

In addition, the extraction of gas is a common cause of pollution, and the burning at the time of consumption releases large amounts of carbon dioxide, accelerating climate change. Governments may attempt to account for, or regulate, such pollution through environment and carbon taxes.

Finally, governments can charge companies as a form of incentive or disincentive. If a government decides, for example, to prioritize domestic production over exports, it may charge companies customs or export duties.

The case of Australia

So how does Australia charge for the extraction and export of its gas? Gas deposits in Australia are found both onshore and offshore. Gas is extracted from underground, cooled into a liquid form and exported on tankers. Most of this extraction is conducted by multinational corporations, and the vast majority of gas is exported to Japan, China and South Korea.

Regarding the exploitation of onshore gas, taxes and other payments required depend on the state. Offshore gas beyond the coastal waters is regulated by the federal government.

Royalties are charged only for projects in Queensland and one federal project in Western Australia. According to an analysis by the Australia Institute, between 2020 and 2024, Australia exported gas in the form of liquid natural gas (LNG) valued at 265 billion AUD. Of that amount, no royalties were paid on 149 billion AUD (58%) worth of gas. Regarding the gas that did incur royalty payment, royalty payments amounted to 9%, generating just 10.4 billion AUD. In essence, this means that the bulk of gas in Australia is given by the government to the multinational companies for free.

While it is apparent that the majority of companies do not pay for the gas itself, they are still liable to pay tax on profits. This takes the form of corporate tax set at 30%, and an additional tax of 40% on superprofits, known as the Petroleum Resource Rent Tax (PRRT).

(Created based on data from the EIA)

But only a tiny fraction of these taxes are ever paid by these corporations. Until the huge price increases of the Ukraine war, the percentage of corporate tax being paid by oil and gas companies as a whole had fallen dramatically. In spite of selling tens of billions of dollars worth of LNG each year, corporations extracting gas pay relatively little in corporate tax, with many gas projects often paying none at all. As of 2025, for example, Australian gas corporation Santos Limited had made zero corporate tax payments for ten years straight. And although the PRRT was first introduced in 1986, but as of 2023, no LNG projects had paid any PRRT to the government at all.

The Australian tax system is exceptionally generous towards these companies in allowing them to reduce taxable profits. It allows tax credits for a range of expenses, and also allows for losses incurred by gas projects to be carried forward and accumulated. The Australian Greens party asserts that this “partly transfers construction risk to the Australian public, who have no ability to manage this risk”. As of 2024, carry-forward credits were estimated at 282.6 billion AUD.

Furthermore, corporations are creative and skilful in finding ways to avoid paying taxes. This includes dubious profit transfer practices. Shell, for example, which extracts gas from Australia and sells it on Japan, does this trade, at least on paper, via a separate entity based in Singapore. The price is marked up in Singapore, allowing a large portion of profits to be transferred from Australia to Singapore, which is a low-tax jurisdiction.

And it is not simply an issue of gas extracting corporations not paying taxes or royalties. It is also important to note that federal and state governments provides a range of subsidies to these corporations, including the refunding of fuel taxes, and the provision of infrastructure that supports the industry.

Japan and Inpex

Japan is one of the largest importers of gas in the world. Australia is its largest supplier, with gas being exported to Japan by several companies. Japan taxes the gas it imports more heavily that the Australian government taxes its exports. As a result, incredibly, the Japanese government makes more money from Australian gas than does the Australian government. Also incredibly, as Japanese companies buy more gas than is used in Japan, they resell more gas to other countries than they import from Australia.

Sunrise over INPEX’s LNG plant in Darwin Harbour (Photo: Geoff Whalan / Flickr [CC BY-NC-ND 2.0]）

One of the corporations extracting Australian gas and exporting it to Japan is Inpex, Japan’s biggest oil and gas explorer. Although it is a private corporation, the Japanese government maintains a 22% stake. It operates a number of gas extraction projects, the largest being the Ichthys LNG Project, an 800-square kilometre offshore gas field connected by an 890-kilometre pipeline to an LNG plant and export facilities in Darwin. Production began in 2018.

In August 2025, Inpex announced it was raising its net profit forecasts, citing strong production at Ichthys as a key reason for the increasing profitability. As a result of these profits, Inpex increased its forecast for the level of dividends to shareholders, and even announced a large-scale buy back of its shares.

Meanwhile, in December of the same year, a review of Australian Tax Office (ATO) data by the Australia Institute, found that the Inpex-operated Ichthys LNG Pty Ltd had paid zero corporate tax for six years straight. Nor does the company pay any royalties or Petroleum Resource Rent Tax. Furthermore, the INPEX project has become a source of pollution, with large amounts of toxic chemicals from its facilities in Darwin Harbour being reported.

Inpex has released a factsheet touting its contributions in the form of tax, which asserts that “Paying tax is one of the most important contributions we make to the social and economic development of Australia. We are proud of the tax we pay and the benefits these payments bring to all Australians”. But the figures it provides regarding the amount of tax the company pays appear to be comprised largely of payroll tax by its employees. It is also worth noting that gas extraction is a capital intensive industry, generating relatively low levels of employment.

Because of these interests, Inpex and the Japanese Government regularly engage in Australian political debate on gas. Successive Japanese Ambassadors to Australia have threatened that Japanese investors will “just go to other countries” if there are any gas tax “surprises”. A senior Japanese executive warned of “sinister consequences” if Australia attempted to restrict or tax gas sales to Japan. Japanese Government criticism of Australian policy and tax settings was seen as “highly unusual” as recently as 2022, but is now common. Some Australian politicians have characterized the conduct of Japanese government and business representatives as “bullying”.

The Japanese and Australian prime ministers in conversation, 2025 (Photo: Cabinet Secretariat / Wikimedia Commons [Public Data License (Ver.1.0)]）

Carrots and sticks

How is it that the exploitation of gas in Australia is so beneficial for highly profitable Japanese and other multinational corporations and so disadvantageous for the Australian people? Why have politicians allowed such a system to be created, and why do they not seek to change it? Surely they have much to gain politically from a stream of revenue that would be generated simply by imposing commensurate taxes and royalties on gas.

The answer seems to lie in the political power that these corporations wield. In the words of senator David Pocok, “they’re obviously a very powerful industry. They’ve been at it for a long time. They know how to work the system… They also carry a very big stick”. That they threaten to “come after” any government that attempts to change the current arrangements.

The industry clearly has carrots and sticks at its disposal. Inpex, Santos and other corporations extracting gas do give campaign contributions to major political parties, but Rod Campbell of the Australia Institute sees a number of other factors as playing a far more significant role in the political failure to reform the current system. In an interview with the author, he pointed to a past political trauma that continues to “haunt” the current Labor Party administration. Attempts by Labor prime minister Kevin Rudd to impose carbon and mining taxes contributed to his downfall in 2010, and were also politically damaging for his successor Julia Gillard. Behind this sharp erosion of support was a massive negative campaign waged by the industry and its lobby groups against these governments.

Campbell notes that many Labor Party politicians who experienced this trauma are still in positions of power today, and that the party “lives in fear” of another such campaign. To a degree confirming such fears, as public pressure for tax reform began to build in early 2026, the industry lobby group, Australian Energy Producers (AEP), launched a multimillion-dollar campaign against any such moves. The opposition party, on the other hand, aligns itself more closely with the interests of the mining industry, which it sees as being helpful in delivering political victory.

But the influence extends beyond such campaigns. A considerable number of politicians and bureaucrats tasked with introducing and implementing policies related to gas and other fossil fuels are able to secure lucrative positions with oil and gas companies after leaving government. This implies that there is a career incentive for people in government to act in ways that are beneficial to the industry.

The Great Hall, Northern Territory Parliament House, Darwin (Photo: Geoff Whalan / Flickr [CC BY-NC-ND 2.0]）

Corporations also devote a considerable amount of time and energy to directly lobbying politicians. It has been observed, for example, that in less than three years since the Labor Party took power in 2022, Japanese corporations that extract gas in Australia “met privately with Australian cabinet ministers and officials at least 24 times”. Senator Pocock also raised questions about the fact that lobbyists for the oil and gas industry had somehow managed to obtain access-all-areas passes to Parliament House, allowing them to come and go and approach politicians as they please. Day-to-day interaction through dinners, receptions and junkets help to solidify a sense of solidarity.

Is the tide is turning?

Regardless of the hold that gas companies appear to have over politicians, questions remain as to why the public would accept such a state of affairs that is so clearly disadvantage to their well-being. Campbell observes that one of the key reasons why the fossil fuel and mining industry has managed to avoid concerted public opposition is its collective ability to convince the public that their industry is the backbone of the Australian economy – that its contribution to the economy and employment is far greater than it actually is.

But public awareness that the majority of Australia’s gas is being given away for free, and that the Australian government is failing to tax the multinational corporations that are extracting it, is rising. And this is not just the result of the work of independent politicians (whose power is rising in Australian politics), and the work of organizations like the Australia Institute, and the Australian Council of Trade Unions (ACTU). Concerned citizens have also managed to mount successful social media campaigns garnering millions of view, and even make inroads into parts of the traditional media, which tends to align itself with the interests of political and economic elites.

Proposals to rectify the current state of affairs are centred around the introduction of a 25% tax on tax exports. The Australia Institute has even posted on its website a tracker that shows in real time the billions of dollars of tax revenue being ‘lost’ by Australia as long as it fails to implement such a policy.

Tracking tool showing, in real time, the tax revenue that continues to be lost (from the Australia Institute’s website, reproduced with permission.)

Beyond the issue of securing adequate revenue from the country’s natural resources, environmental concerns regarding the exploitation of fossil fuels must also be addressed. While there is much agreement on the need to increase the revenue for Australia from existing gas projects, there is also much agreement on the need to prevent the commencement of new projects to increase the extraction of gas.

Continued and expanded use of gas as a source of energy is incompatible with international agreements to halt climate change. Many assert that the taxes raised from gas could be used to help fund the transition to renewable sources of energy.

The Australian government does not yet appear to be ready to reform revenue collection from gas, but public momentum is growing, and it may be just a matter of time.

Writer: Virgil Hawkins

Graphics: Mohammad Istiaq Jawad