For the first time in years, the UK Treasury will benefit from Big Oil’s tax payments, as high energy prices drive up profits.
The payments will be made at a time when energy companies are facing criticism in the United Kingdom, as their record profits contrast with rising household costs of living. After Shell Plc and BP Plc reported large profits this week, activists and lawmakers renewed calls for a windfall tax, but UK Prime Minister Boris Johnson appeared to rule it out.
Because of losses connected to their investments in North Sea fields, the corporations, like many other oil and gas producers in the United Kingdom, normally pay no corporate tax in the United Kingdom. They also receive subsidies for decommissioning outdated platforms in the aging basin, meaning they earn more money from the government than they payout. With the exception of 2017, Shell’s tax bills have been covered by credits every year since 2015.
In an earnings call on Thursday, Chief Financial Officer Sinead Gorman said, “Given the current macro, we will pay the tax this year.” “Clearly, I expect us to pay hundreds of millions in the United Kingdom in the next years.”
Even yet, the windfall levy may still be demanded. Following Shell’s outstanding profits on Thursday, Greenpeace campaigner Philip Evans argued that such a tax “would be the fastest and fairest way to reduce pressure on homeowners” and pay for making houses warmer and more energy efficient in the UK.
After obtaining rebates every year since at least 2015, BP paid roughly $42 million in tax in the United Kingdom in 2020. This year, the corporation expects to pay between 1 billion and 1.5 billion pounds ($1.2 billion-$1.9 billion) in North Sea income.
“At these prices, BP will certainly pay four to five times the amount of tax it has paid over many, many years,” said Chief Executive Officer Bernard Looney in an interview Tuesday.