Energy firms slam ‘unstable’ UK tax regime claiming higher windfall taxes will hit investment
Major oil and gas businesses have lashed out at windfall taxes, accusing Britain of being one of the most ‘fiscally unstable’ places to do business.
The Association of British Independent Exploration Companies (Brindex), which represents 20 UK oil and gas firms, has written to Chancellor Jeremy Hunt warning that higher windfall taxes could jeopardise investment in new projects.
The current windfall tax regime, introduced earlier this year by Rishi Sunak when he was still Chancellor, has created ‘long- lasting fiscal uncertainty’, Brindex claimed in the letter, first seen by the Financial Times.
Investment fears: The Association of British Independent Exploration Companies has written to Chancellor Jeremy Hunt (pictured)
The levy had made the UK ‘one of the most fiscally unstable and complex regimes to do business in’, the group warned.
The letter came amid reports Hunt could increase the tax on energy firm profits to 30 per cent from 25 per cent in this month’s Budget.
He is trying to plug a £54billion hole in the public finances through tax rises and spending cuts.
Such a move would take the oil and gas sector’s effective tax rate to 70 per cent when combined with its 40 per cent headline rate, which consists of corporation tax of 30 per cent and a 10 per cent supplementary charge.
The Chancellor is also considering extending the extra windfall tax to 2028, three years beyond its expiry date at the end of 2025.
Brindex chairman Robin Allan said another change to the windfall tax regime, less than a year after it was introduced, would be ‘disastrous’ for the sector.
He said uncertainty about what would be announced in the Budget on November 17 was ‘helping drive investment out of the UK’.
Allan also encouraged Hunt to retain the investment allowance for the sector introduced by Sunak in May, which allows companies to save 91p in tax for every £1 they invest in projects in Britain.
He said any attempts to water down the tax allowance would be ‘yet another blow to the sector’s already weakened confidence in the UK tax regime’.
But demands for more punishing windfall taxes have grown recently as energy firms take in bumper profits.
Last week, BP reported third-quarter profits of £7.1billion, up from £2.9billion a year earlier, and, in October, Shell posted a profit for the period of £8.2billion compared to £3.6billion in 2021.
The oil giants have also unveiled hefty stock buybacks and dividend hikes, which while benefiting investors have enraged politicians and activists, many of whom have accused the industry of cashing in while households struggle with crippling energy bills.