Exceptional tax would affect energy security and green investments, industry warns

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“Opportunistic” calls for a windfall tax on the North Sea would undermine energy security and hurt both the economy and investments in renewables, the oil and gas industry has warned.

Labor’s proposal for an additional tax raid as part of a scheme to subsidize household bills would hit an already heavily taxed sector, said Mike Tholen, sustainability director at Oil and Gas UK.

“Opportunistic calls for a one-off tax are not in anyone’s interest; we must work together to meet current and future energy challenges. The tax system is already working efficiently, with the Treasury seeing significantly higher returns from companies operating in the North Sea, ”he said.

“Over the next two years the Treasury expects an additional £ 3bn in tax revenue from this industry, with an expected direct tax levy of almost £ 5bn. The upstream oil and gas industry already pays almost double the corporate tax rate that other sectors pay. “

Industry pays corporate tax of 30pc, compared to 20pc for most other businesses, plus an additional charge of 10pc.

Labor has proposed adding an additional 10 percentage points to this bill to raise £ 1.2 billion as part of a series of measures which the party says could be used to cut household bills by 200 pounds sterling.

The opposition has said it wants to target energy producers who have “profited from the price hike”.

The call comes as the energy price cap is expected to rise by around 50% in April, following the 12% increase in October.

Mr Tholen said additional taxes would hurt investments in green energy.

“Oil and gas companies are at the forefront of developing carbon capture, hydrogen and wind power, investing billions in green infrastructure across the UK,” he said .

“A one-off tax would damage investor confidence with long-term consequences for the UK economy, the security of UK energy supply and the industry’s contribution to the development of sustainable energy solutions of the future . “

Andy Mayer, of the Institute of Economic Affairs, said the government had tried to raise the additional tax over the previous decade, but found that investment and production had plunged, underscoring the dangers of surprise raids.

“The whole system needs a fundamental review with a return to a simpler system with fewer waivers, consistent taxation for different types of energy supply and a carbon tax to reflect the challenge of change climate, ”he said.

Danielle Boxall of the Taxpayers’ Alliance said cutting red tape would help.

“It’s understandable that politicians want to help those fighting high energy prices and soaring costs of living. However, a one-off tax on North Sea oil and gas would only punish companies for problems that are not of their own accord and increase our dependence. on unreliable imports, ”she said.

“If political parties are serious about helping, they should call for reducing the burden of regulations and taxes that push up the price of energy instead of symbolically pulling down on businesses.”

A spokesperson for the Ministry of Business, Energy and Industrial Strategy said measures were in place to help pay the bills.

“Energy price caps are currently protecting millions of consumers from high gas prices around the world. We will continue to listen to consumers and businesses on how to manage energy costs, ”he said.

“We recognize that people face cost-of-living pressures, which is why we are taking action worth over £ 4.2bn and supporting vulnerable households through initiatives such as the £ 500million Household Support Fund, Hot House Rebate, Winter Fuel Payments and Cold Weather Payments.

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