Oil and gas industry representatives discussed ‘a range of fiscal issues’ with ministers yesterday at the first meeting of the Fiscal Forum, established last September ‘to encourage constructive discussion’ on tax issues.
‘We want to deliver a tax regime that encourages investment and innovation, while also making a fair contribution to the public finances,’ said Chloe Smith, Economic Secretary to the Treasury.
Malcolm Webb, Chief Executive of Oil & Gas UK, said the discussions focused largely on how extending the field allowance structure and providing certainty on decommissioning tax relief ‘can stimulate investment and avoid infrastructure being prematurely decommissioned, at no net cost to the Exchequer’.
‘Whilst a number of robust projects have recently secured investment, we are concerned that over one billion barrels of the UK’s oil and gas resource will remain undeveloped in the current tax regime,’ Webb said.
‘Furthermore, resolving uncertainty on decommissioning reliefs could deliver an additional two billion barrels; the market in mature North Sea assets has virtually dried up. Setting all this against 2011’s dramatic falls in exploration drilling and in production and the resultant £2.3bn drop in expected tax revenues, measures to stimulate investment need to be introduced as a matter of urgency.’
Last year saw ‘a continuation of “cash grab” taxation’, according to Chris Sanger, Global Head of Tax Policy at Ernst & Young, with ‘a £2bn per annum raid on oil and gas companies, raising the effective tax rate to 81% for petroleum revenue tax, which was hypothecated back into a cut in fuel duty’.
Writing in Tax Journal (16 December 2011), Sanger argued that the link between the increase in oil and gas taxation and a reduction in fuel duty was an unwelcome development: ‘Such hypothecation of taxes and tax receipts restricts the free choice of the Treasury to raise money where most appropriate and spend where needed.’
Oil and gas industry representatives discussed ‘a range of fiscal issues’ with ministers yesterday at the first meeting of the Fiscal Forum, established last September ‘to encourage constructive discussion’ on tax issues.
‘We want to deliver a tax regime that encourages investment and innovation, while also making a fair contribution to the public finances,’ said Chloe Smith, Economic Secretary to the Treasury.
Malcolm Webb, Chief Executive of Oil & Gas UK, said the discussions focused largely on how extending the field allowance structure and providing certainty on decommissioning tax relief ‘can stimulate investment and avoid infrastructure being prematurely decommissioned, at no net cost to the Exchequer’.
‘Whilst a number of robust projects have recently secured investment, we are concerned that over one billion barrels of the UK’s oil and gas resource will remain undeveloped in the current tax regime,’ Webb said.
‘Furthermore, resolving uncertainty on decommissioning reliefs could deliver an additional two billion barrels; the market in mature North Sea assets has virtually dried up. Setting all this against 2011’s dramatic falls in exploration drilling and in production and the resultant £2.3bn drop in expected tax revenues, measures to stimulate investment need to be introduced as a matter of urgency.’
Last year saw ‘a continuation of “cash grab” taxation’, according to Chris Sanger, Global Head of Tax Policy at Ernst & Young, with ‘a £2bn per annum raid on oil and gas companies, raising the effective tax rate to 81% for petroleum revenue tax, which was hypothecated back into a cut in fuel duty’.
Writing in Tax Journal (16 December 2011), Sanger argued that the link between the increase in oil and gas taxation and a reduction in fuel duty was an unwelcome development: ‘Such hypothecation of taxes and tax receipts restricts the free choice of the Treasury to raise money where most appropriate and spend where needed.’
