‘Windfall tax on oil giants will prove counter-productive’

Business leaders have argued against a windfall tax on oil and gas giants after chancellor Rishi Sunak threatened to impose them.

Mr Sunak insisted energy companies should pay a tax on their profits unless they “support the economy” by increasing investment in UK energy supply.

The controversial call seemed to differ from Prime Minister Boris Johnson’s own views who recently described the idea as a “tax on business”.

The soaring price of oil and gas, and rising sector profits, have led to repeated calls for a oneoff windfall tax to help households with rising fuel bills.

However, Aberdeen and Grampian Chamber of Commerce (AGCC) repeated its claims that such taxes were a “blunt instrument” that put jobs and investment in the North Sea at risk.

It also issued new research which showed taxes on the sector were already set to rise, potentially as high as £10 billion, due to spiralling oil and gas prices caused by the war in Ukraine.

Speaking in a question and answer session with users of the Mumsnet website, the chancellor said the levy is something he would “look at”.

Labour has estimated this would raise £1.2bn over the year ahead to provide targeted support to households and businesses.

However, AGCC’s research shows the Treasury has already banked £1.5bn more in the first three months of this year than it did over the same period in 2021.

One of the world’s leading energy tax experts has suggested tax revenues from the North Sea could now top £10 billion in the year ahead.

AGCC found the Treasury has raked in more than £1.7 billion in tax from North Sea oil and gas firms in just 90 days, a 670% rise on the same period last year..

It also said offshore operators and licensees have been paying over £19 million in tax per day since the turn of the year.

Between April 2021 and March 2022, offshore companies paid just over £3bn in tax, according to data from the Office for National Statistics– a 586% increase on the previous 12 months.

Ryan Crighton, policy director at AGCC, said a windfall tax “would place jobs, tax revenues and our domestic energy security at risk, and also limit the ability and appetite in investing in low carbon research and development we so desperately need.

“Perversely, this would likely drive up energy bills and be entirely counter-productive.”