Energy firms slam ‘unstable’ UK tax regime
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Energy companies reject ‘unstable’ UK tax regime, claim higher windfall taxes will hurt investment
Major oil and gas companies have lashed out at unexpected taxes, accusing Britain of being one of the most ‘fiscally unstable’ places to do business.
The Association of British Independent Exploration Companies (Brindex), which represents 20 British oil and gas companies, has written a letter to Chancellor Jeremy Hunt warning that higher windfall gains could jeopardize investment in new projects.
The current tax regime, introduced by Rishi Sunak earlier this year when he was still a chancellor, has led to “prolonged fiscal uncertainty,” Briindex claimed in the letter, first seen by the Financial Times.
Investment anxiety: The Association of British Independent Exploration Companies has written to Chancellor Jeremy Hunt (pictured)
The levy made the UK “one of the most fiscally unstable and complex regimes to do business in,” the group warned.
The letter came amid reports that Hunt could raise taxes on power company profits to 30 percent from 25 percent in this month’s budget.
He is trying to close a £54 billion gap in public finances through tax hikes and spending cuts.
Such a move would bring the effective tax rate of the oil and gas sector to 70 percent in combination with the nominal 40 percent rate, which consists of a 30 percent corporate tax and a 10 percent surcharge.
The chancellor is also considering extending the additional windfall tax until 2028, three years after the expiration date at the end of 2025.
Bridex chairman Robin Allan said another change to the windfall tax regime, less than a year after its introduction, would be “disastrous” for the industry.
He said uncertainty about what would be announced in the budget on November 17 would “help drive investment out of the UK”.
Allan also encouraged Hunt to keep the investment deduction for the sector introduced by Sunak in May, allowing companies to save 91p in tax for every £1 they invest in projects in the UK.
He said any attempt to water down the tax deduction would be “another blow to the industry’s already weakened confidence in the UK tax regime”.
But lately, the demand for more punishing windfalls has increased as energy companies reap huge profits.
Last week, BP reported third-quarter profits of £7.1bn, up from £2.9bn a year earlier, and in October Shell posted a profit for the period of £8.2bn, compared to £3. .6 billion in 2021.
The oil giants have also unveiled hefty share buybacks and dividend hikes, which, while beneficial to investors, have enraged politicians and activists, many of whom have accused the industry of raising money as households grapple with crippling energy bills.