A trade association stated that the state would lose out on 12 billion pounds (USD 16 billion) as a result of the British government’s proposed plans to raise a windfall tax on North Sea oil and gas producers.
The headline rate of tax on oil and gas activities will reach 78%, among the highest in the world, on November 1st, thanks to the Labour government’s announcement in late July that it would raise the Energy Profits Levy (EPL) from 35% to 38%. Additionally, it was given a one-year extension, ending in March 2030.
Moreover, the levy’s 29% investment allowance—which permits businesses to deduct taxes from reinvested capital—will be eliminated as part of the modifications.
According to the Treasury, the government intends to quickly increase the capacity of renewable energy sources, and tax contributions from oil and gas companies will contribute to this plan.
However, industry group Offshore Energies UK predicted that, in comparison to the current tax system, the changes to the EPL would result in a 12 billion pounds reduction in tax revenue between 2025 and 2029.
OEUK stated that over the period, capital investment in the sector is anticipated to decrease from approximately 14 billion pounds to 23 billion pounds.
“The proposed tax changes will trigger an accelerated decline of domestic (oil and gas) production, and a corresponding reduction in taxes paid, jobs supported, and wider economic value generated,” OEUK CEO David Whitehouse said in a statement, as reported by Zawya.
“We are committed to maintaining a constructive dialogue with the oil and gas sector to finalise changes to strengthen the windfall tax, ensuring a phased and responsible transition for the North Sea,” a Treasury spokesperson said.
A rapid increase in renewable energy and a move away from oil and gas are among the challenging goals for reducing carbon emissions that the Labour government has set.
From the beginning of the millennium, when it peaked at 4.4 million barrels of oil equivalent per day (boed), North Sea production has steadily decreased to approximately 1.3 million boed today.
The North Sea Transition Authority (NSTA), a regulator, predicts that by 2050, there will be less than 200,000 boed.