The Guardian (UK): Clawback reaped from booming oil sector: “Oil companies were hit by a £1.1bn tax surprise yesterday…”: “Shell, which produces 22% of North Sea output along with its partners, played down the impact of the changes.”: “...consumers are angered by firms such as Shell which made a £9.4bn profit.” (ShellNews.net) 17 March 05
Corporation levy change funds council tax refund
Terry Macalister
Thursday March 17, 2005
Oil companies were hit by a £1.1bn tax surprise yesterday as Gordon Brown funded some of his immediate spending plans by the early clawback of revenues owed by a booming energy sector.
By changing the way he collects corporation tax from the North Sea, the chancellor has at one stroke paid off the cost of handing out council tax breaks to pensioners.
"I am aligning the timing of oil companies' corporation tax payments more closely with petroleum revenue tax," said Mr Brown, in what appeared to be a throwaway line during his budget speech.
Details provided later by the Treasury revealed the immediate and enormous benefits to the chancellor's coffers at a time when soaring crude prices have swollen oil company profits and attracted consumer criticism.
Tax experts from Ernst & Young warned there would be a negative effect on cashflow, but BP said last night it was still studying the impact of the move on its business.
"We are not reacting overly at the moment. We have seen the [Treasury] guidelines but it is all somewhat complex, so we will not know the exact impact till we have gone through all the details," said a BP spokesman.
Shell, which produces 22% of North Sea output along with its partners, played down the impact of the changes.
"It does not have any effect on our overall tax payments," said a spokeswoman.
The UK Offshore Operators Association said it was relieved the overall level of the tax regime had not been increased but the organisation's economics director, Michael Tholen, warned that smaller firms might suffer.
"It would be ungracious for us to complain at the moment [of record profits] but it might not be welcomed by those companies that are starting up and growing," he argued.
Oil company shares were down in the City - but only in line with a general market fall as analysts remained calm about the tax changes. "It's a slightly off thing to do, but it's not like a repeat of the windfall tax that butchered North Sea investment. I don't think it will make a very great difference," said Bruce Evers, an an alyst with Investec Securities.
In the past, corporation tax was collected partly in arrears, with four instalments being paid by oil firms over a 12-month period starting in July of the relevant year.
Under the new scheme, the Treasury will start collecting the 2005 tax take in July, followed by two further instalments ending January 2006.
The chancellor had previously made himself unpopular with oil companies by raising corporation tax by 10% in April 2002. This caused a slump in North Sea investment, which has now recovered.
A more benign tax regime, high crude prices and a couple of high profile discoveries have encouraged North Sea companies to spend £9bn this year.
Mr Brown knows he is on safe political ground with the electorate when he grabs back early a sizeable chunk of revenues because motorists are unhappy about the amount they pay at the pumps.
Even though most of the forecourt price is made up of the highest level of taxes in Europe, consumers are angered by firms such as Shell which made a £9.4bn profit.
http://www.guardian.co.uk/business/story/0,,1439415,00.html
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