THE WALL STREET JOURNAL: North Sea oil producers face tax increase in U.K.: Many major oil companies, including BP PLC and Royal Dutch Shell PLC, may have some insulation from the effect of the tax increase, since their overall production is spread out over many regions in the world.": Tuesday 6 December 2005
By BENOIT FAUCON
DOW JONES NEWSWIRES
December 6, 2005; Page A19
LONDON -- At a time of mounting criticism in Europe and the U.S. of oil companies and their record profits, Britain's finance chief proposed a sharp increase in taxes on companies producing oil in the North Sea.
The U.K. Treasury yesterday announced it would increase by 10 percentage points a tax levied on crude-oil producers in the country's North Sea region, a decision that industry experts said could cut industry investment. The Treasury estimated the changes will generate some £6.5 billion ($11.3 billion) in additional revenue over the next three fiscal years.
In a pre-budget report, Chancellor of the Exchequer Gordon Brown said a special charge on profit already enforced on companies producing oil in the U.K. would be raised to 20%, from 10% previously. Mr. Brown introduced the 10% charge in 2002, which comes on top of a 30% tax normally applied to all U.K. corporate profits.
The move comes as governments around the world, including Venezuela and Russia, are using today's higher oil prices and the industry's bumper profits to force through better terms from companies with whom they have oil-production agreements. In the U.S., a political backlash against sky-high gasoline prices in the wake of this fall's hurricanes has led some state and Washington lawmakers to propose a windfall-profit tax, though such a measure is unlikely.
The majority in Parliament of Britain's Labour Party makes enactment of Mr. Brown's proposals likely.
Many major oil companies, including BP PLC and Royal Dutch Shell PLC, may have some insulation from the effect of the tax increase, since their overall production is spread out over many regions in the world. But some smaller companies, whose activities are concentrated in the U.K. North Sea, may be more exposed to the planned tax increase.
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