Following the dramatic decline of the price of oil in the past few months, North Sea oil and gas companies will be offered tax cuts by the Chancellor in order to avoid withdrawal of investment and production.
Industry body Oil & Gas UK has insisted that a tax cut of as much as 30 percent is required in order to straighten up the unfriendly and outdated tax structure to one which is suiting to the needs of today. At current the basic tax levy is 60 percent but that this can increase to 80 percent for established oil fields.
Chancellor George Osborne has said that whilst he cannot pre-empt the March Budget, he implied that there may be “further reductions in the burden of tax on investment in the North Sea”. It is hoped that such tax cuts will not only protect the UK’s ability to provide oil, but also the thousands of jobs the oil industry currently provides.
The importance of a substantial tax cut cannot be underestimated with the current situation, Mike Tholen, the economics director at Oil and Gas UK has reported that “if we don’t get an immediate 10 percent cut, then that will be the death knell for the industry.” He went on to say that a 10 percent cut would be only the beginning and that this should be followed by a further 20 percent reduction later on in order to encourage investment.
Despite the troubles that have been faced by the industry in recent times, we believe that a turnaround is soon on the cards and this tax adjustment could be the catalyst the industry needs.
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