Windfall tax rise ‘would cost oil and gas industries £13bn’
INCREASED windfall taxes on offshore oil and gas industries would land the sector with a £13billion bill over five years – and cause a fall in tax receipts, industry chiefs have warned.
Industry body Offshore Energies UK said the proposed rise in the Energy Profits Levy would see investments in UK projects by oil and gas producers fall from an expected £14.1billion to £2.3billion between 2025 and 2029.
Its report added while the expected tax take from the sector would go up in the short term, a rapid fall in production triggered by the loss of investment would result in a £12billion decrease in tax receipts.
Under the Government’s change, EPL would rise to
38% from November 1 – which the OEUK says would push up the headline rate on upstream oil and gas activities to 78%.
David Whitehouse, chief executive of OEUK, said:
“The Prime Minister has said that the Budget will be painful.
“This is a Government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy.
“This paper shows that proposals to go further will trigger an accelerated decline of domestic production, and a corresponding reduction in taxes paid, jobs supported and wider economic value generated. With an industrial strategy built in partnership with Government, the UK can leverage the strengths of its offshore energy industry, put homegrown innovation and technology at the heart of its net zero ambitions, and ensure the UK is globally attractive for energy investment.
“For more than two years UK oil and gas operators have paid three times the rate of corporation tax of any other sector in the economy.”
The report claims projects being cancelled or deferred as a result of the rise could put 35,000 jobs at risk, the loss of economic value would hit supply chains and the UK may lose capability and infrastructure abroad.
Mr Whitehouse urged the Government to work with the sector to find a way to manage offshore energy while protecting jobs: “Time is running out to mitigate damage that has already been done and to avoid further escalation.
“The Prime Minister promised to manage the North Sea in a manner that does not jeopardise jobs.We now need an honest conversation on how we can do this and need Government to work with the sector at pace.”
The Treasury said: “We are committed to maintaining a constructive dialogue with the oil and gas sector.”