LONDON – Oil & Gas UK has responded to last week’s proposal by Britain’s opposition Labour Party to impose a £6-billion ($8.16 billion) ‘windfall tax’ on North Sea E&P companies to offset rising domestic energy prices.
The association calculates that the industry in the UK will pay around £3 billion ($4.08 billion) in extra corporation tax because of the global rise in gas prices, without the need for any further tax action.
OGUK has analyzed how the increase in the gas price, from 24.9p per therm in 2020 to a spot price peak of 454p per therm in 2021, will benefit the UK Treasury.
Jenny Stanning, OGUK External Relations Director, said: “Our industry pays up to 40% corporation tax on its profits – roughly double any other sector. That means that the UK Treasury is already gaining significantly from these price rises.
“It is predicted to get an additional £3 billion in corporation taxes in the two years from last April – making a total of around £5 billion [$6.8 billion] based on Treasury figures…
“In the longer term a windfall tax would be damaging for consumers because it would undermine our competitiveness and discourage energy companies from investing in the UK. That would make us even more dependent on imports from places like Russia and the Middle East.”
Stanning pointed out that 73% of Britain’s total energy is still supplied by gas and oil, and gas generates 42% of electricity consumed. “So, the Europe-wide gas shortages are a stark reminder of why the UK should safeguard its offshore sector – and financial stability is an essential part of that.”