Budget 05: Oil tax will pay for pensioners
'Windfall' tax on oil looks set to pay for chancellor's pensioner policy.
The oil industry looks set to pay for the chancellor’s giveaway for old age pensioners, accountants said.
In a move that the Tories branded ‘a windfall tax by any other name,’ oil companies will now have to pay tax in three instalments rather than four, increasing government revenue by £1.1bn this year, according to government figures.
The chancellor pledged £800m to providing a council tax rebate for the over 65s in the Budget.
Instead of paying a quarter of their tax liabilities on four separate occasions, oil extractors will now pay half of their liability at the third opportunity.
The move will also raise revenues in the years ahead, by £210 million next year and by £170 million the year after. While the Chancellor will lose a quarter of the tax revenues for the next year, he will also gain a quarter from the year after. Since revenues from the tax are expected to rise anyway, that will mean further increases.
Accountants said the change was similar to reforms of corporation tax introduced in 1997, which also brought forward tax payments.
Christopher Sanger, tax partner at Ernst & Young, said this was a skillful ‘cash-grab’, and that the money would be earmarked for pre-election giveaways for OAPs.
A Treasury spokesman denied this was a breach of a pledge not to change the tax regime for the North Sea.