The UK Treasury announced a plan to ease a windfall tax on the profits of UK oil and gas companies.
The tax rate, which has been at 75% for the companies since last year, will return to 40% if average energy prices fall to $71.40 a barrel for oil and 54 pence a therm for gas for two consecutive quarters, the government said Friday.
That mechanism will “protect domestic energy supply and help safeguard some of the tens of thousands of jobs reliant on the sector”, the government said in a statement. But it also said it’s unlikely the mechanism will be triggered before the tax’s planned end date in March 2028.
The potential softening of the tax illustrates the government’s desire to spur investment and boost economic growth, while making the country less dependent on imports of oil and gas.
The windfall tax has raised around £2.8 billion ($3.5 billion) to date, helping the government pay for subsidies that eased the burden of high energy bills for households, according to the statement. But the UK’s oil and gas sector has been urging the government to scrap the levy when energy prices fall back to “normal levels,” warning that it’s deterring investment.
Any reduction of the tax could be a politically tricky move, with Labour pledging to block new North Sea oil and gas exploration and calling for an extension of the current tax.
Prime Minister Rishi Sunak brought in the levy in May 2022 in response to soaring prices exacerbated by Russia’s war in Ukraine.
Author: Alex Wickham, Joe Mayes and Rachel Morison
