Thank you for contacting me about energy companies’ profits.
I appreciate that you would like to see a windfall tax on oil and gas companies, however, the Government does not intend to introduce such measures for a number of reasons.
Sudden rate changes would discourage investment – including in green technologies and away from fossil fuels – and job creation, depress production and make the UK more reliant on imported gas. The oil and gas industry and its supply chain support almost 200,000 jobs, but investment in 2020-21 was at an all-time low of £3.5 billion. There is £11 billion of opportunities awaiting investment and the Government believes that a windfall tax would threaten the investment we need to support jobs and increase the economic recovery of our gas resources.
Further, as I understand it, a 10 per cent windfall tax, which has been proposed, would likely raise much less than they claim, and depending on companies’ behavioural response, may actually reduce tax revenues. Additionally, the current tax rate charged on oil and gas profits, which is 40 per cent, is already more than double the rate charged on profits in most other sectors of the economy, which is 19 per cent, and has been in place since 2016. It was not reduced when the oil price fell to below $20. I am sure you can appreciate that for these reasons a windfall tax will not be introduced.