Treasury is asking why the Petroleum Resource Rents Tax collects only a fraction of the revenues it could. Actually, they know exactly what is wrong, but need public consultation in case someone has a bright idea to fix this broken tax without conflict.

There are billions of dollars involved. If government wants the money, a bare-knuckle fight with oil and gas producers is certain. Is this battle worth having?

Norway’s petroleum tax regime allowed it to build a sovereign wealth fund now worth over a trillion dollars. This gives Norwegians lower taxes and better services. The fund was only started in 1990.

Dr Cameron Murray wrote Prosper’s submission to the Treasury inquiry.

He lays out the major loopholes introduced into the law that severely undermined the tax and let oil and gas producers organise their affairs to avoid paying.

The Australian Constitution makes it very clear government owns the nation’s minerals, on behalf of us all. Bad legislation means these lofty constitutional principles are not put into practice.

The PRRT is an extraction charge. Once lifted out of the ground, our valuable mineral wealth can never be replaced – which is why resource rent taxes are so fundamentally important.

Resource rent taxes are hard to enforce without skilled auditors and good knowledge of the internal workings of the producer. We failed at this important administrative task.

If the bureaucracy and legislature lack the institutional strength to stand up to rent-seeking resource producers, Cameron Murray offers a counsel of despair – we may as well opt for a simple 10% royalty. That would make more than the broken PRRT we now have.

What’s the difference? Oh, about a trillion dollars – money that will now have to be taxed from wages instead.