Explanatory Memorandum(Circulated by authority of the Minister for Primary Industries and Energy, the Hon. John Kerin, MP)
Financial Impact Statement
25. The principal financial impact resulting from the commencement of these two Acts will be the prospective revenues from Areas A, B and C of the Zone of Cooperation. These revenues cannot be estimated at this time because there is little detailed knowledge about the geology of Area A, and hence its economic potential. The Zone of Cooperation is, however, within the Timor Sea region which is a proven oil producing region. Prospective revenues include:
- Australia's share of revenue derived from production sharing contracts;
- taxation by Australia of 50% of business profits earned by companies from petroleum operations in Area A; and
- taxation by Australia of individuals income in accordance with the Taxation Code.
26. Article 11 of the Treaty provides that the Joint Authority will be self funding from contract fees collected under Part VI of the Petroleum Mining Code. Such fees however, will not be receivable until contract bids are received and contracts are subsequently awarded. The initial working capital requirement of the Joint Authority over its initial year is provisionally estimated at $US 2 million, of which Australia's contribution is $US 1 million. It is anticipated that this amount will be repaid within five years. This advance will be sought in the normal appropriation legislation.
27. Obligations under Article 4 of the Treaty provide that:
- 10% of contractor's Income Tax collected by the Republic of Indonesia from corporations producing petroleum from Area C of the Zone of Cooperation will be paid to Australia; and
- prospectively, Australia will pay to the Republic of Indonesia 10% of gross Resource Rent Tax revenues collected by Australia from corporations producing petroleum from Area B of the Zone of Cooperation.
28. Articles 23.5 (a) and (b) of the Treaty provide for remission of customs duty for goods used in petroleum operations in Area A. Until the petroleum potential of Area A is better understood and hence development plans are prepared, there is no basis on which to estimate the impact of this provision.