Oil industry support revoked
The Government has withdrawn the majority of its support for the oil industry, reviewing the last remaining taxpayer help for fossil fuel industries.
It has put an end to research and development, sponsorship, promotional events and funding exploration data. Support has been been winding down since the Coalition Government was elected.
Last month it extended the income tax exemption for oil rigs for another five years until 2024, despite leading a worldwide push not to subsidise fossil fuel companies.
It says the tax break is necessary to stop the oil rigs and seismic vehicles ‘‘churning’’ in and out of New Zealand waters every 183 days to escape all tax liability, and means that they will still pay other taxes to the Government.
Green Party energy spokesman Gareth Hughes said the changes were a priority for the party and it wanted to see all support measures for fossil fuel industries come to an orderly end. ‘‘Over the last 10 years there have been more than $237m of taxpayer money given to one of the world’s most profitable industries that is burning the planet.’’
He was glad the special treatment for oil and gas industries had almost ended and the last remaining taxpayer funded support measures for fossil fuel industries in New Zealand would be reviewed.
For far too long, the oil and gas industry had benefited from financial support measures which had encouraged fossil fuel exploration, he said.
The move follows the release of the Government’s work programme in response to The Tax Working Group Final Report. It recommended that a review of tax provisions for the petroleum mining rules be considered for inclusion on the Tax Policy Work Programme. This would include, support measures such as options to address the seven-year spreading provision for petroleum development expenditure.
There will be a review of the future of the non-resident oil rig exemption and the ‘‘seven-year spreading’’ provision, which officials have described as ‘‘least defendable’’.
This spreading provision is a special tax treatment that changes the way the tax bill is paid in the oil industry. Less tax is paid in the initial stages of drilling because of the capital intensive and long term nature of oil production.
The Government accepted the recommendation in its response to the TWG report. The Minister of Finance and the Minister of Revenue have committed to including it on the refreshed Tax Policy Work Programme to be released shortly, and that this review be completed before the 2020 General Election.
Meanwhile, an oil and gas lobby group is refuting the industry gets special tax treatment.
Petroleum Exploration and Production Exploration Association of New Zealand chief executive Cameron Madgwick said last year the issue was investigated by the Productivity Commission.
It concluded that ‘‘New Zealand provides only minor (less than $4 million a year) government support to activities with some relationship to fossil-fuel production and consumption’’, he said. ‘‘There are no direct subsidies for our industry. In fact, we are a major net contributor to New Zealand. The Government receives 42 per cent of all profit from most producing fields, with an average of $500m per year in taxes and royalties going to the Crown.’’