A senior Turnbull government minister has urged caution on changing tax rules to reap billions of dollars in revenue from the LNG industry.
Revenues from the 40 per cent petroleum resource rent tax (PRRT) levied on profits generated from petroleum commodities had halved since 2012/13, while crude oil excise revenues have more than halved.
Treasurer Scott Morrison has asked former Treasury official Michael Callaghan to report by April - just weeks before the federal budget - on ways to ensure the taxes are still operating as they were originally intended and determine why there has been a revenue dive.
It's estimated extending the commonwealth royalty regime to five LNG projects could generate between $30 billion and $45 billion over three decades.
However, Revenue Minister Kelly O'Dwyer told a Minerals Council conference in Melbourne on Thursday lower taxes encourage the mining industry to take risks and create wealth.
"It is also why those who propose changes to the tax arrangements of oil and gas entities - such as those that want a change to the PRRT and royalty arrangements - must be able to demonstrate not only the reasons for the change, but also that such a change won't lead to sovereign risk and risk to investment and employment in the sector," the minister said.
On the broader question of company taxes, she said Australia 15 years ago had the ninth lowest corporate tax rate among advanced economies.
"Today, only five of the 35 countries in the OECD have a corporate tax rate higher than ours," Ms O'Dwyer said.
Ms O'Dwyer also told the conference the new "diverted profits tax" - aimed at discouraging multinationals from artificially shifting their Australian profits to lower tax countries to avoid paying Australian tax - would not replace the operation of transfer pricing rules as they apply to ordinary transfer pricing disputes.
"The diverted profits tax will potentially apply to a small number of multinationals and only if there is a principal purpose of obtaining an Australian tax benefit," she said.
"Consequently we believe it is unlikely that the DPT will have any material impact on investment in Australia."
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