If you seriously believe that ridding the country of a minerals tax will boost income and create jobs, it stands to reason the same logic should be extended to the petroleum tax, writes Ian Verrender.

The mining tax is dead!

As the nation rejoiced over the removal of yet more potential budget revenue last week, basking in the reassuring glow that foreign investors can now reap the benefits from Australia's mineral export boom, one can only hope the Government turns its attention to eliminating the one remaining impediment to national development: the dreaded Petroleum Resources Rent Tax.

The what? That's right, the petroleum version of the mining tax, the one that's quietly been in operation for a quarter of a century.

In the interests of consistency, surely its elimination must be a national priority.

Ever since the Minerals Resources Rent Tax was introduced in July 2012, the mining industry has thundered and roared that it would drive every miner out of the country, that it would kill the goose that laid the iron and coal egg.

If you seriously believe that ridding the country of a minerals tax will boost income and create jobs, it stands to reason the same logic should be extended to petroleum.

So where are the anti-resource-tax storm troopers now, those willing volunteers eager to campaign for the removal of what surely must be an equally evil and useless impost? Missing In Action.

Maybe it's a solids only thing, a natural prejudice against liquid and gaseous resources.

Or perhaps the answer lies in the fact that the very success of the petroleum tax over more than a quarter of a century has blown a gaping hole in every argument put forth by the mining lobby and its compliant media commentators over the supposed detrimental effects of the mining tax.

Since its introduction, rather driving oil explorers from our shores, Australia has been a magnet for the world's biggest petroleum players. Why? Stable government, world class legal system, access to finance and equity markets and quality infrastructure. Oh yeah, and some world class deposits.

Australia's petroleum tax simply has never been an issue for the global oil and gas industry.

This may come as a shock but Tony Abbott and Joe Hockey, rather than committing to rid the nation of the tax, have enshrined it and even endorsed Julia Gillard's extension of the tax.

What's that? The Prime Minister and the Treasurer endorsing a Gillard resources tax? Strange, but true. And all while they railed against the mining tax.

The petroleum tax is expected to provide just shy of $2 billion this financial year, putting the meagre receipts from the mining tax into stark perspective.

Receipts vary wildly from year to year, depending on oil prices. When they soared in 2008/09, the tax delivered $2.184 billion. Two years later, they plunged to $806 million.

With almost $40 billion in investment in the east coast gas export industry about to come on stream - with three huge projects nearing completion at Gladstone in north Queensland - the tax could deliver windfall gains to federal coffers in the next few years, provided prices hold up.

Paul Keating introduced the Petroleum Resources Rent Tax back in 1987 and John Howard maintained it as an important revenue source. But Keating's original tax was confined to oil and gas only in Australian waters. And, importantly, it didn't include Woodside's massive North West Shelf project.

When Kevin Rudd launched the mining tax in 2010 - at that stage foolishly called the Resources Super Profits Tax - he also announced with a great deal less fanfare that the petroleum tax would be extended to onshore projects. Not only that, the North West Shelf would be included.

Unlike the new Super Profits Tax, the old oil and gas impost was simple and easy to understand; a 40 per cent tax on profits from oil and gas projects, along with state based royalties.

Given oil companies had been paying it for a quarter of a century, they could hardly put up a legitimate fight against extending it to land based projects. They didn't even bother.

The Resources Super Profits Tax, by contrast, was a nightmare, academically elegant but dense and hugely complex, where the Commonwealth ended up in a virtual partnership on mining projects.

After a relatively short but hugely successful scare campaign, run through major media outlets by a mining lobby bursting at the seams with cash, Rudd's demise was sealed, his government on the ropes and his replacement, Julia Gillard, desperately seeking a solution.

She hastily accepted a neutered tax, largely written by BHP Billiton, Rio Tinto and Xstrata.

Had Rudd emulated Keating - a long period of industry consultation and negotiation - and offered a choice between the complex Henry version and the simple petroleum tax version, the federal budget would be much healthier today.

The whole sorry story of how the mining tax was botched and then torpedoed marks a dark chapter in the nation's history where cashed-up vested interests hijacked political debate with minimal effort to the long-term detriment of the nation.

Would BHP or Rio Tinto have left Australia? Not because of a resources tax if the petroleum experience is any measure.

They will only beat a retreat when the minerals are gone and, in the case of iron ore, that's in about 50 years time on current extraction rates.

Despite all the noise, the short-lived mining tax didn't deter new projects either.

Even Gina Rinehart, one of the most vociferous opponents, worked tirelessly through the Gillard years raising finance for her Roy Hill iron ore mine in the Pilbara.

Ironically, Rinehart and her father Lang Hancock, have lived off mining royalties for decades. Not that she'd call that a tax. Perish the thought.

Old Lang, the Pilbara pioneer, struck a deal with Rio Tinto back in 1962 for a 2.5 per cent royalty over the ore extracted from many of the company's mines. By 2012, that was throwing off about $100 million a year into the family coffers.

Technically, royalties are not taxes although the mining industry often claims they are when it is convenient.

A few weeks back, the Minerals Council claimed the industry paid $22 billion a year in taxes, attempting to justify the scrapping of the mining tax. Scrape the surface, however, and $10 billion of that was in royalties to state governments.

What's wrong with royalties? They are inefficient, they vary across state boundaries and they fail to capture extra income during booms such as we've just experienced.

According to the Henry Review, total resource taxes and royalties accounted for about 52 per cent of resource profits in 2001/02. Seven years later, that had dropped to 18 per cent as the imposts failed to keep pace with rocketing minerals prices.

Royalties took front and centre stage during the mining tax debate. In her haste to strike a deal with the three big miners, the tyro prime minister agreed to industry demands to allow state royalties to be creditable against the mining tax.

That prompted West Australia, Queensland and New South Wales to hike royalty charges despite the florid rhetoric from each of the premiers opposing mining taxes. That's one reason the mining tax failed to capture any revenue.

And in a brilliant bit of blindsiding, the three big miners even had her agree to allow them to write off all new investment against the tax. This was in 2010, just as every miner in the country began spending like drunken sailors to expand production.

That guaranteed no cash would roll in until, er, right about now when the investment side of the boom ended. What perfect timing.

Still, who needs revenue? Rather than restructure the mining tax, the best way to eliminate the deficit is to slash spending, cut superannuation entitlements and ensure 80 per cent of the proceeds from Australia's diminishing resources flow offshore.

So come on, stand up. Axe that petroleum tax.

Ian Verrender is the ABC's business editor. View his full profile here.