Tuesday, 3 September 2013

The grass is always greener

From City AM:
 
THE CHANCELLOR today gave the oil and gas industry a welcome boost by clarifying tax reliefs and urged Scotland to remain part of the UK to maximise the North Sea's remaining energy reserves...
 
The oil and gas sector has long-campaigned for tax reliefs, arguing that if the government does not encourage investment, explorers will go to places with a far friendlier tax climate, such as Norway. This would in turn increase the UK's dependence on imports and leave domestic resources untapped.
 
Er....
 
In Norway, the corporation tax rate on offshore oil and gas companies is 78% (basic rate 27% plus 51% additional rate).

5 comments:

Ian Hills said...

When the oil runs out we should charge a special high rate to Scotland for exports of shale gas.

Should wipe the fat smile off Alex McBastard's face.

Bayard said...

Come on Boy George, can't you come up with a more plausible excuse than that for stuffing your pals' pockets with money?

Kj said...

Other thhan the tax rate, there may be some subtle differences that make Norway better for other reasons. The deduction for exploration costs especially, that can actually be paid out if it´s a negative liability, until there´s a taxable surplus. In essence, govt pays 78% of the costs.

Mark Wadsworth said...

IH, unless they are independent by then.

B, yes, Help To Buy is even more popular.

Kj, originally, in the UK there was a 100% first year deduction for all expenses, including the cost of the oil rigs. The loss could be carried forward, so most North Sea companies did not pay tax for the first five years they were actually pumping oil. And they now pay a higher rate of corporation tax (about 50%, I think).

That seems like a sensible system to me. I don't know it they've changed that, I think they are arguing about the details here.

So we observe that a 100% first year deduction + high corporation tax rate means that "the government pays 78% of the costs" which is all right and proper.

Kj said...

MW: Yup, and it´s also refundable here. But it remains to be known whether he meant something along the lines of the details in the tax system, or was just exceptionally ignorant about the facts.