Page 4 - EurOil Week 23 2022

EurOil COMMENTARY EurOil

UK U-turns on windfall tax

The move has been roundly panned by the North Sea oil industry, which has

warned that it will deter investment and undermine the energy transition.

UK THE UK government imposed a 25% tax on “We will introduce a temporary and tar-
profits by oil and gas companies in late May, geted energy profits levy but we have built into
WHAT: marking a policy U-turn and a departure from the new levy a new investment allowance that
The UK government has the North Sea industry-friendly image that it has means companies will have a new and signifi-
reversed course and sought to cultivate. cant incentive to reinvest their profits,” Sunak
imposed a £5bn windfall The one-off surcharge is on top of the 40% told Parliament. “The more a company invests,
tax on the North Sea oil headline tax rate that the industry already pays the less tax they will pay.”
industry. on its profit, as well as its 30% ringfenced corpo- The levy includes an 80% Investment Allow-
ration tax and 10% supplementary charge. The ance that means businesses will overall get a
WHY: government said the move would raise around GBP0.91 tax saving for every pound they invest.
The government is under GBP5bn ($6.3bn) over the next year, helping The government said this was nearly double the
pressure to tackle the to support a £15bn support package that will tax relief currently available.
cost-of-living crisis, and provide each UK household with a GBP400 dis-
the tax will help provide count on their energy bill, and more for low-in- Industry response
discounts on energy bills come households. However, the tax was roundly criticised by the
to households. Prime Minister Boris Johnson’s administra- North Sea oil and gas sector, with industry body
tion has previously resisted opposition calls for OEUK describing it as a “backward step by a
WHAT NEXT: such a tax, arguing that it would deter invest- government which, just weeks ago, pledged to
The North Sea oil industry ment at a time when the global energy crisis has build a greener and more energy-independent
has warned that the made sufficient domestic energy supply critical. nation.”
move creates investment However, amid soaring energy costs that have “The Energy Profits Levy, announced today,
uncertainty, undermining exacerbated a cost-of-living crisis in the UK, the will discourage UK offshore energy investments,
both investment and the government has shifted its position. meaning declines in oil and gas exploration and
energy transition. Announcing the move, Chancellor of the production, and so force an increase in imports,”
Exchequer Rishi Sunak avoided calling it a wind- OEUK CEO Deirdre Michie said in a statement.
fall tax in an address to Parliament, and stressed “This is the exact opposition of what was prom-
that it included provisions that would encourage ised in the British Energy Security Strategy, pub-
investment. lished just last month.”

P4 www. NEWSBASE .com Week 23 10•June•2022