Windfall tax suspension possible for power companies amid falling oil prices

The UK authorities has declared its intention to droop the windfall tax on oil and fuel firms if prices return to regular ranges for a sustained period. This transfer would reduce the overall tax fee on power corporations from 75% to 40%. The windfall tax was introduced last 12 months to fund a scheme aimed toward reducing power payments for households and businesses. The tax has been beneath scrutiny as power agency profits have soared just lately due to rising demand following the lifting of Covid restrictions and the impression of Russia’s invasion of Ukraine on energy prices.
The Treasury introduced that the windfall tax would remain in place till March 2028, however the tax fee would lower if average oil and gasoline costs fall to or under a set level for 2 consecutive three-month durations. The ranges have been set at US$71.forty per barrel for oil and £0.fifty four per therm for gasoline. As of Friday morning, Brent crude oil was trading at US$75 per barrel, with gasoline prices around £0.sixty two.
Unlock have been urging the federal government to scale back the windfall tax, warning that it has led to a decrease in funding. In response to the tax, Harbour, the UK’s largest oil and gas producer, introduced it might cut 350 UK onshore jobs. French oil giant TotalEnergies also revealed plans to scale back its 2023 North Sea funding by £100m because of the extension of the windfall tax.
The Treasury said that its determination took these considerations under consideration, acknowledging the potential threat to the UK’s long-term domestic provide and the increased reliance on imports. The Energy Profits Levy, launched by Prime Minister Rishi Sunak in May last yr when he was chancellor, initially had a fee of 25%. This was later increased to 35% by current Chancellor Jeremy Hunt, efficient from January 2023.
The levy applies to income created from extracting UK oil and gas however excludes other activities corresponding to refining oil and selling petrol and diesel on forecourts. With the windfall tax, the general tax rate faced by oil and gasoline firms is 75%. If the tax is suspended, the overall tax fee would return to 40%.
Trade physique Offshore Energies UK welcomed the announcement however cautioned that the industry nonetheless faces challenges. Chief Executive David Whitehouse stated, “This is a step in the best path, but many extra will need to be taken to restore confidence to our sector.”

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