The petroleum resource rent tax has failed to collect billions of dollars in revenue and the Turnbull government should reintroduce royalties for natural gas projects off north-west Australia, a resource tax expert has said.

Dr Diane Kraal from Monash University has warned flaws in the PRRT regime mean Chevron’s giant Gorgon gas project off WA will not pay the tax until “at least 2030”, despite decades of operation.

She said modelling showed $5bn in revenue would be raised from Gorgon by 2030 if royalties were reintroduced. She urged the Coalition to do just that to ensure Australians were properly remunerated for the exploitation of their gas resources.

She said her research indicated other natural gas projects in commonwealth waters should also be subject to commonwealth royalties, including Chevron’s Wheatstone, Woodside’s Pluto LNG project, and Inpex’s Ichthys project.

The treasurer, Scott Morrison, announced a formal review of the PRRT regime in November following a rapid decline in revenues from the tax.

He acknowledged revenues from the PRRT had halved since 2012-13, while crude oil excise collections had fallen by more than half. When he announced his inquiry into the tax, he said he wanted it to be completed in time for this year’s budget.

It followed months of disquiet about the effectiveness of the tax and warnings from groups like the Tax Justice Network that Australia was set to blow another resources boom because the PRRT was failing to collect adequate revenue from the explosion in liquefied natural gas exports.

Kraal has made six recommendations for reform of the tax. In her submission to the PRRT review, seen by Guardian Australia, she says the government ought to retain the PRRT legislation, but with significant modifications.

She says the “transferability” of exploration expenses ought to be overhauled. “Transferability of exploration expenditure was negotiated for oil back in 1990, and is not working as intended today for gas,” her submission says.

“Gas projects only provide utility rates of return, not ‘super profits’ as found in oil. Transferability of exploration expenses should be modelled for a fairer outcome from community resources.”



She also calls for an overhaul of the “gas transfer price” method, which is used to price gas feedstock used in LNG processing.

“There are alternatives, such as the use of the ‘mid-stream breakeven price’ method, or the ‘Net Back’ method alone, either of which would derive a fairer price,” her submission says.

“Advance Pricing Arrangements should be made transparent to the public, much like the Australian Tax Office ‘sanitised’ private rulings or interpretive decisions.”

Kraal’s submission is based on new research which she presented at the Australasian tax conference in New Zealand mid-January.

She says the research is significant for its unique review of Australia’s petroleum taxation from the 1980s to the rise in the 2000s of natural gas projects for LNG export.

According to the ATO, revenue from the PRRT plummeted by 32% in 2014-15, a decline of $576m, despite significant growth in export production.

Last year, the Australian National Audit Office released a damning report revealing “significant shortcomings” with the way in which royalties were levied on offshore petroleum operations from the North West Shelf (NWS) off Western Australia.

It found oil and gas companies operating in Australia may have wrongly claimed billions of dollars in tax deductions in recent years, leaving governments underpaid millions in royalties.

In September, a letter cosigned by 21 union and left-leaning organisations, including the Australian Council of Social Service, the ACTU, Greenpeace, the Australia Institute, ActionAid, GetUp and the Uniting church, was sent to the prime minister, Malcolm Turnbull, and Morrison calling for a parliamentary inquiry into the PRRT.