Post by Sapphire Capital on Aug 7, 2008 1:37:40 GMT 4
UK government may impose windfall tax on energy companies
Source: Joanna Faith
The UK government is considering imposing a windfall tax on energy companies that have benefited from the staggering surge in oil prices.
Alistair Darling, the Chancellor of the Exchequer, is thinking of enforcing a one-off tax payment on companies' profits in a bid to help poorer families struggling to pay their household bills. But it is unclear if the windfall tax would hit oil and gas producers or suppliers.
"The oil and gas industry is already the most highly taxed industry in the world," said John Bartlett, vice-president and group head of tax at BP International. "In the UK North Sea, with marginal tax rates up to 75%, the government is already receiving a windfall."
Overall tax yield from the sector has increased from just over £4 billion ($7.8 billion) in 2000/2001 to an expected £15 billion ($29 billion) in the financial year 2008/2009.
A windfall tax could also have a detrimental impact on investment in the sector.
"Investors in oil and gas projects are looking at projects spanning 20 or 30 years," said a spokesperson from Oil & Gas UK, the representative organisation for the UK offshore oil and gas industry.
"Instability in tax rates could have a negative effect and result in less investment," she said.
Bartlett said that an additional profit tax imposed on international oil companies will reduce the amount of capital available for investment.
"Lower investment will, within a few years, result in less production and consequently higher prices," he said.
But Age Concern, the UK organisation working with and for older people, said the issue is about fairness.
"Consumers will feel that it is only fair that the energy industry shares the burden of rising energy costs, rather than simply passing these onto the consumer," a spokesperson said.
"Wide-ranging reforms, backed by a fair funding package, are needed if we are to stop fuel poverty levels escalating."
Source: Joanna Faith
The UK government is considering imposing a windfall tax on energy companies that have benefited from the staggering surge in oil prices.
Alistair Darling, the Chancellor of the Exchequer, is thinking of enforcing a one-off tax payment on companies' profits in a bid to help poorer families struggling to pay their household bills. But it is unclear if the windfall tax would hit oil and gas producers or suppliers.
"The oil and gas industry is already the most highly taxed industry in the world," said John Bartlett, vice-president and group head of tax at BP International. "In the UK North Sea, with marginal tax rates up to 75%, the government is already receiving a windfall."
Overall tax yield from the sector has increased from just over £4 billion ($7.8 billion) in 2000/2001 to an expected £15 billion ($29 billion) in the financial year 2008/2009.
A windfall tax could also have a detrimental impact on investment in the sector.
"Investors in oil and gas projects are looking at projects spanning 20 or 30 years," said a spokesperson from Oil & Gas UK, the representative organisation for the UK offshore oil and gas industry.
"Instability in tax rates could have a negative effect and result in less investment," she said.
Bartlett said that an additional profit tax imposed on international oil companies will reduce the amount of capital available for investment.
"Lower investment will, within a few years, result in less production and consequently higher prices," he said.
But Age Concern, the UK organisation working with and for older people, said the issue is about fairness.
"Consumers will feel that it is only fair that the energy industry shares the burden of rising energy costs, rather than simply passing these onto the consumer," a spokesperson said.
"Wide-ranging reforms, backed by a fair funding package, are needed if we are to stop fuel poverty levels escalating."