BusinessCorporate FinanceMP urges action over oil billions

MP urges action over oil billions

The record profits reported by oil giants have re-opened a debate over whether large companies should pay a windfall tax on their profits.

Following Royal Dutch/Shell recording a massive £9.8bn profit for the year, BP was predicted to deliver even larger profits this week, with the figure of £13.5bn being mentioned in the run up to the results.

The huge inflation in profits led to Labour MP Alan Simpson to start a parliamentary petition last month.

The politician expressed his ‘concern’ over ‘past and future domestic energy price increases on households who struggle to pay for the fuel they need to maintain a warm and healthy indoor environment’.

Simpson was backed up by the chairman of the influential trade and industry select committee who last week said that the government should consider such a tax. He said that oil giant Shell should be ‘encouraged’ to invest more money in community and social responsibility projects.

But John Healy, economic secretary to the Treasury, who pointed out that the oil and gas companies would pay as much as £6bn in corporation tax. ‘When profits and prices are high, oil companies pay more tax,’ he said.

The UK Offshore Operators Association, which represents the interests of the British oil industry, said last month that the higher gas and crude oil prices had already earned the Treasury a windfall of between £2.5 and £3bn in extra taxes.

‘The industry is in a race against time to recover the UK’s remaining oil and gas reserves before existing pipelines and production facilities are decommissioned and removed,’ the UKOOA said. ‘A windfall tax at this stage would demolish the good work that has been done.’

Chas Roy-Chowdhury, head of tax at ACCA, said a windfall tax would represent ‘unnecessary government intervention’.

‘Businesses need stability, certainty and incentive. If there is a risk that every time they have a successful year they face an extra heavy tax – the major incentive may be to fall short of the threshold at which the windfall tax would be levied,’ he said.

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