Welcome to Global Tax Talks I'm Chloe
Fox.
Today I'm delighted to be joined by James O'Reilly from our Australian
tax practice. James is our Energy, Utilities, and
Resources Tax Leader. So James welcome
to Global Tax Talks. Thanks,
Chloe. Thanks for having me. James, you and your team are just about to publish
a half yearly report that covers a range of different tax and regulatory,
changes for a number of different regions
specific to the Energy, Utilities, and Resources sector. What would you say
are the key takeaways or the things that people should
really be watching out for when they read the report? Yeah, Chloe, there's
been quite a lot of changes over the last six months. So maybe if I give
just a brief summary of some
of the kind of core things. In Nigeria there's been a pretty comprehensive
tax, changes that are being introduced from
1 January 26. From an EU&R perspective, kind of high points are:
there a range
of new incentives for petroleum producers in Nigeria, which
is welcome. And there's also
increased reporting requirements for mining royalties for mining producers in Nigeria. If we look here, where we
are in the UK, at the moment, in the Autumn Budget,
we got more detail around the oil and gas price mechanism. That's a
mechanism that's going to replace the energy profits levy from 2030. And effectively what
it will look to do is
apply an additional 35% tax once certain price hurdles are met. If we look at the US,
we've heard a lot about the One Big Beautiful Bill Act, that does introduce
a range of incentives which
are going to support the
energy and resources business, particularly around immediate deductions for tangible
assets. But it does also come with some restrictions
around existing tax credits, in
particular for solar and wind producers. In order to get access to most of
those credits, they're
going to need to hit production from 2027. And then
finally, from a Canadian perspective, we've
seen an extension of
the flow through credit schemes for mining exploration, which is welcome. But
we've also seen a slight restriction on
narrowing of the definition of exploration expenditure from a Canadian tax perspective,
so there’s some of the changes, there’s a
lot more there. So hopefully the viewers will get an opportunity
to
see the full publication at the end of the month. Absolutely. I'm sure people will
be really looking forward to having a peruse through
it. Just to kind of change track a little bit. So the latter
half of 2025, we obviously saw a lot of developments,
particularly in the Pillar Two space, as various
different countries legislated or prepared to legislate for Pillar Two. Can you maybe
talk to us a little bit about how multinational
EU&R businesses in particular should be approaching Pillar Two, or what should heads of tax
really
be watching out for within the sector? Yeah. Look, I think, like most sectors, I think
2026 is really going to be
the year when the rubber hits the road. As far as
Pillar Two goes, I think for most organisations, this is going to be
the time where they have to start filing and reporting
and and paying ultimately under Pillar Two. So I think that's going
to be a big focus
is around readiness for those compliance obligations. Of course,
we've just seen the Side-by-Side, provisions come out from the OECD
a couple of
weeks ago. So getting across those new safe harbours and understanding their
relevance will be really important. But yeah, I think front
of mind is really around. Have we
got the systems and processes in place that we need to
to meet those reporting requirements? You know, notwithstanding
some of these safe harbours. We know that the
Pillar Two rules are complex and they're going to involve a lot of
additional obligations for tax teams, who, let's face it, a lot of the
time are pretty stretched already. So I think it's around making sure those policies
and procedures are in place. Do we have the systems, the data
readiness and the governance procedures we need to make sure that that process
runs
as smoothly as possible? Absolutely. I mean, Pillar Two has probably been
one of the biggest disruptors from a tax perspective
in the last few years. But we are also seeing some
other disruptors, outside of tax. So for example, geopolitical changes, you know,
a changing economic landscape, etc. These themselves are having an impact
on various different tax policies. You know, I
suppose within the various different, sectors within
the EU&R industry, which, you know, how should businesses maybe
be thinking about whether it's mining, energy production, renewables,
whatever it is, how can they think about building long term business resilience
in a world where so much is changing day to day, week to week,
month
to month? Yeah. Look, I think our industry
is, acutely aware of the impact of tax policy
on their business. I think it's something that, is a real focus for,
for tax teams and heads
of tax and, and it's kind of reflected in the fact that all of those sectors
that you talk about, are typically invested in long
term investment investments, capital intensive investments, and they also tend
to be subject to a range of different tax regimes with a range
of different regulators. So, you know, you can see royalties at sort of
a state level for extractive industries, corporate tax at
a federal level. So, quite a broad range of taxes that comply and a change in
any one of those can really significantly impact, you know, the
viability economically of, of existing projects as well
as future projects. So, yeah, clearly the tax function has a
really important role to play in helping organisations prepare
and manage that. I think that's some of the actions that can be
taken is something that we addressed in the New Tax Order publication that we
put out recently. And, you know, if I just touch on a couple
of those things, the first one is making sure the message is
really out there around the tax contribution that is
already being made. I think the industry is has a
really strong history of how they've kind
of approach that. Tax transparency has
always been something that's been well championed by tax functions
in our industry, and I think it continues to be really
important that there's a really clear messaging around the
total tax contribution. So people really understand, you know, how
existing tax policy is reflected in in
contributions to society. I think the second thing is making sure that there's
an active scanning of the horizon for what kind of tax policy changes could
be coming up. You know, whether that be through direction of travel
around societal issues or specific kind of initiatives that might be
mooted by governments. Clearly, understanding what could be
coming is important. And then looking to undertake scenario modeling to kind
of understand, well, if some of those changes do happen, what is the
sort of impact there could be
for our business? And then
finally, I guess using those two things to make sure there's
really active involvement in actual tax policy discussion, consultations, those
kind of forums, making sure the resources are committed
to ensure that, you know, your organisations and industry is able
to really articulate the impact of those policies on on their
investments and decisions. Yeah, I think it's such an important point to being able to being able to
tell your story as well,
particularly like etc. the total tax contribution so important and I suppose to kind of
build on that, you know, a way in which businesses either are going to want
to or going to have to tell their tax story is through You
know, mandatory disclosures like public country by country reporting or
other disclosures.
And given that the EU&R businesses typically operate across jurisdictional,
you know, they're subject to a range of different reporting requirements.
I suppose.
What advice would you have for tax professionals and tax functions
when they're thinking about telling the story,
particularly from a kind of a data gathering perspective?
Yeah, yeah.
Look, I think for the reasons I've discussed,
I think, the organisations in the industry I represent,
have a long and strong history around tax transparency.
So I think they'll feel quite confident about their ability to respond
to the public country by country requirements.
That said, they're a bit different.
They're they're quite granular.
Some of those disclosures,
they're going to involve different kinds of information at different levels.
And so I think there will be an important process of making sure you're prepared
and ready. As you kind of highlight, data is sort of key to all of that.
It's key to so many things.
But is it easily accessible?
Is it consistent?
You know, is it in a position that will kind of allow you to respond
across the breadth of different public sector regimes?
You know, second to that goes the governance process.
When you have this started going out at a granular level,
when you have slightly different regimes which are all inconsistent
or slightly inconsistent, then having the right governance
controls in place to make sure that you offer robust data
across the breadth of those, those regimes will be really important.
And then I think the last point is, and it might sit outside of that public
country by country reporting requirements, but do you have the right narrative
to go along with it?
You know, some of the information
provided on its own doesn't really provide a full story.
And so I think what we've found
in existing regimes is it's important to have the right
messaging to really help the audience understand what those numbers mean.
Yeah, absolutely. Couldn't agree more.
James, thank you so much for joining us today.
Really, really great insights.
And thank you for joining us.
Come back next time. So that you stay Global Tax Ready.