Oil & Gas UK said falling oil prices are creating an urgent need for fundamental changes to the tax regime.
Malcolm Webb, OGUK chief executive, called for abolition of the 30% supplementary charge on the corporation tax, which was introduced and then increased in direct response to rising oil prices, most recently in 2011 (OGJ Online, Dec. 3, 2014).
He said abolition would still leave oil and gas producers paying corporation tax at 30%, a tax rate 50% higher than the rest of British industry.
“We are encouraged to see a growing political and industry consensus around the now pressing need for more fundamental and urgent changes to the tax regime,” Webb said.
With a significant amount of UK oil and gas production “not even covering costs” at $50/bbl, “the industry cannot carry the burden of a tax rate between 60 and 80%,” he said.
Webb said the industry is resolutely focused on tackling the cost and efficiency challenges it faces to improve the competitiveness of North Sea operations.
“The Treasury’s promise in last year’s Autumn Statement of a simplified tax allowance to encourage new investment must be delivered by Budget 2015 if it is to have any impact,” Webb said. “However, with the continually falling and potentially sustained low oil price, this is no longer enough.”