New Windfall Tax Proposals Could Destroy UK Local O&G Production
A new round of windfall taxes would leave the UK facing decades of energy insecurity, heap further costs on consumers, and make the nation more dependent on other countries for gas and oil, Offshore Energies UK warned.
It follows new Labour Party proposals to extend the Energy Profits Levy, known as the windfall tax, by applying it retrospectively and shutting off the exemptions designed to promote investment. The taxes imposed on the companies producing oil and gas in UK waters were increased from 40 percent to 65 percent in May this year – higher than any other industry and the highest rate of tax in the history of the North Sea.
OEUK warned then that imposing sudden new taxes would make the UK seem fiscally unstable and a riskier place to invest, meaning investors would move overseas.
The sector is proud to already contribute many billions of pounds in taxes. It has contributed £375 billion in the past five decades. And now, the UK citizens look to it to keep the nation’s lights on, homes warm, and fuel its transport system as well as help the country become energy independent.
The Energy Profits Levy, implemented from May, is predicted to raise another $6 billion in its first 12 months on top of the $9.4 billion from corporation taxes already expected in 2022/23. This will give the UK government about $15.6 billion towards its current $18 billion support package for consumers.
OEUK outlined three key concerns with the proposals. Namely, any further taxes taken from UK operators would be small compared to what consumers need, but those extra taxes would have a destructive impact on the industry by discouraging investors who would move to other countries, and if investment declined, then production would plummet – creating a disaster for UK energy security
“The government has a duty to both protect consumers and to ensure national energy security. Labour’s proposals to hit our own producers with further taxes will discourage investment and so risk a rapid decline in UK production.”
“That would mean buying more energy from abroad, increasing the UK’s trade deficit and further risking UK energy security. It comes at the worst possible time for the UK offshore sector, which is still reeling from the introduction of the windfall tax in May,” OEUK’s sustainability director Mike Tholen said.
OEUK is the leading trade body for the UK’s offshore energy industries. Its 400 member organizations employ 200,000 people,10,000 of them offshore, producing energy from oil, gas, and offshore wind. They produce, for example, about 40 percent of the UK’s gas supplies – a vital bulwark against the current global shortages. About 85 percent of UK homes rely on gas for heating. Gas is also essential to produce about 42 percent of UK power.
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