One of the chancellor’s closest tax confidantes has poured cold water on
suggestions that Gordon Brown will impose a windfall tax on oil companies’
profits in Monday’s pre-Budget report.
Goldman Sachs managing director Christopher Wales, a former member of the
council of economic advisers that designed the £5.2bn 1997 windfall tax on
privatised utilities, told Accountancy Age the previous windfall tax ‘was
related to particular circumstances unlikely to be seen again’.
He added: ‘I would be very surprised and disappointed if the chancellor
introduced a windfall tax. Clearly there’s a great tendency to think that
because oil companies have made lots of money, and particularly money that
hasn’t been made in the UK, plus that BP has made record profits this year, that
the UK government isn’t getting its fair share and that a windfall tax should
come into play.
‘If it hasn’t then this is because of structural reasons and the chances are
it is getting its fair share.’
Rumours of a tax on oil companies, as well as a hike in VAT, have been
circulating recently as the chancellor scrambles to find a way to plug the £10bn
black hole. At the very least, it is thought the chancellor may modernise the
system of taxation of North Sea oilfields.
According to Wales, the windfall tax used in 1997 was ‘designed to recognise
the fact that those companies had, to a large extent, been privatised to up the
value. Really it was an attempt to recapture some of the lost revenues to the
Inland Revenue,’ he added.
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