Sources said that Jeremy Hunt, the British finance minister, is looking at a significant increase in a windfall income tax on oil and natural gas companies and extending it to power generation firms. He’s trying to find ways to fix the country’s public finances.
According to a government source, the idea is being considered ahead of Hunt’s announcement on Thursday of a new budget plan.
The Times first reported the plan. It would increase the levy to 35% from the current 25% rate. It would also be applicable to electricity generators, and it would run until 2028 rather than 2025 as is currently planned.
According to the newspaper, the tax will raise 45 billion pounds ($53.3 million) over five years.
A senior source from a North Sea producer who was well-versed in the government’s plans said that it was crucial that a tax incentive be extended. The government also should avoid making further tax changes so that “investors can feel confident and continue to put cash into major North Sea developments.”
Ithaca Energy’s chairman, a North Sea oil-and-gas producer just listed, stated Wednesday that the removal of incentives for investors in oil and natural gas would render the British offshore sector uneconomic.
Hunt and Prime Minister Rishi, the Indian Prime Minister, have warned against tough decisions regarding tax increases and spending cuts. This is in an effort to restore Britain’s economic policy credibility after a bond market selloff that was triggered by September’s abandoned tax cut plans by Liz Truss.
Others have also introduced windfall tax on energy companies, which saw their profits rise after Russia’s invasion in Ukraine. This has caused gas prices to soar.
Shell claims it doesn’t expect to pay British tax in the current quarter, as its investments offset it. This raises questions about how much additional revenue the government will generate from it.
