Tax cuts provide a big boost to North Sea oil and gas industry
George Osborne has recently set a permanent zero-rate on petroleum revenue tax and also cut the supplementary charge. These changes will support the oil industry through the recent downfall and benefit the job opportunities provided within the industry. Mr Osborne said: “The oil and gas sector employs hundreds of thousands of people in Scotland and around our country.
“In my Budget a year ago, I made major reductions to their taxes, but the oil price continued to fall so we need to act now for the long term.
“I am today cutting in half the supplementary charge on oil and gas from 20% to 10% and I am effectively abolishing petroleum revenue tax too, backing this key Scottish industry and supporting jobs right across the country.
“Both of these major tax cuts will be backdated so they are effective from January 1 this year, and my honourable friend the Exchequer Secretary will work with the industry to give them our full support.”
The Scottish deputy first Minister John Swinney supported the changes but highlighted that whilst the changes will support the long term prospects they do not fully address the short-term challenges that are currently facing the oil industry.
Swinney stated that “Further clarity is now urgently required on how the commitment to consider loan guarantees and improve access to decommissioning tax relief will be able to support the sector in the short-term.”
Scottish Labour leader Kezia Dugdale said: “The Chancellor’s announcement on support for the oil and gas industry is welcome, but it doesn’t go nearly far enough.
“What we needed to see from the Chancellor today was support to make sure that essential infrastructure such as platforms and pipelines are not decommissioned early. That’s why Labour is calling for the establishment of a new government agency – UK Oil – to make investments in infrastructure.”
Scottish Conservative leader Ruth Davidson said: “It’s been a very difficult time for the oil and gas sector, but this move shows the UK Government’s determination to help.
“Today’s move will provide confidence within the sector and help support jobs across Aberdeen and the wider north-east.”
Scottish Green MSP Patrick Harvie said: “Recent months have exposed the vulnerability of the Scottish economy to over-reliance on the North Sea oil and gas industry – it’s clear that the next generation can’t trust on the oil industry to provide them with work and security.
“Osborne’s approach to this crisis is short-sighted in the extreme – he has chosen to give yet more tax relief to big oil business while handing over pennies to the renewables sector that, with proper support, could provide quality jobs in years to come.”
Liz Cameron, chief executive of Scottish Chambers of Commerce, said the tax cuts are “a necessary response to the current crisis in the North Sea and a welcome relief”.
Ashley Shackleton, energy spokeswoman at the British Chambers of Commerce, said: “The changes to tax for the UK offshore oil and gas industry won’t have a huge immediate impact but will go some way to secure investor confidence in the sector.”
Grahame Smith, Scottish Trades Union Congress (STUC) general secretary, said the Chancellor “could have provided significantly more support to the oil and gas sector, particularly on exploration incentives and investment allowances”.
Alan McCrae, UK head of energy tax at accountants PwC, said the tax cuts are “a smart move that recognises that the tax prize for the Treasury at this stage in the life of the North Sea is not corporate taxes”.
He added: “Instead, the Government has more tax revenue to gain by doing all it can to protect investment and jobs and all the tax that goes with that.”
Source: The Business Reporter