The threat emerged during Commons debates on details of the Finance Bill amidst protests against the special provision attached to the levy disallowing financing costs in computing taxable profits.
Aberdeen North Labour MP Frank Doran said Kerr MacGee, one of the offshore operators, warned Brown ‘that the supplementary charge will not be creditable against US taxes’ and called for an assurance from Treasury ministers.
And Liberal Democrat MP for Gordon, Malcolm Bruce, also warned that US-based operators ‘may effectively be caught twice’ as a result of the restriction.
Bruce protested that financing costs are ‘a legitimate part of the cost of developing the fields, and if it is not allowed it will substantially alter the profile, the rate of return and even the viability of the development.’
He said debt finance could amount to 70% of project cost ‘and simply to discount it could lead to considerable difficulties and destroy the viability of some projects’.
Economic secretary Ruth Kelly rejected his amendment allowing financing costs, claiming it would open the door to massive avoidance.
She said: ‘One need not be a tax planner to realise that financing costs have to be disallowed if the supplementary charge is to work effectively, otherwise it would clearly be in companies’ interests to arrange their affairs so that all their North Sea activities were funded by borrowing, for which they could claim relief against a 40% tax rate, while their other activities – taxed at 30% – were funded by capital.’
Does Darwin's theory apply to taxation? Colin ponders...
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