UK to Suffer From Oil Tax Hike
May 26, 2011 Taxation in UK
The UK oil industry is standing up in protest to a recent hike in their tax liabilities, claiming that the increased tax burdens place a number of oil extraction projects in danger of closing down or being dropped.
Oil & Gas UK, a UK energy extraction trade association, published a new report on May 25th, detailing the potential effects that a recent tax increase will have on the industry. The research suggested that unless the government reverses already taken actions, the UK will see oil production fall by more than a billion barrels over the next five years, alongside with other significant negative economic effects.
In March the UK government raised the supplementary tax on oil and gas producers’ profits from 20 percent to 32 percent, in order to fund tax decreases on consumer petrol purchases. The newly published research contains the results of a recent survey conducted by Oil & Gas UK on its member companies, aimed to gauge the effects of the tax increase. It was found that the raised rate could lead to at least 25 proposed oil extraction projects being classified as unfeasible, with the economic life span of a further 20 currently active fields being reduced by 5 years. Planned investments into operational projects could also fall by nearly GBP 10 billion, to a level of GBP 23 billion.
In a media statement issued at the time of the release of the research, Malcolm Webb, the chief executive of Oil & Gas UK, explained that the cumulative effects of the lowered investments and dropped projects, would be the loss of an estimated 15 000 jobs. He said that closure of the planned oil extraction projects will result in the government loosing up to GBP 20 billion direct tax revenues. In order to fill the gap caused by the decreased domestic production, the UK would need to import an additional GBP 50 billion worth of oil over the next five years.
Photo by arbyreed