Oil and gas companies face increased tax burden

Paul Boughton
Advisory firm Deloitte’s Head of Tax in Scotland, Derek Henderson said: “The shock news that the supplementary charge tax (SCT) rate has been increased up to 32 per cent from 20 per cent will be a disappointing surprise to the oil and gas industry. It now brings the North Sea marginal tax rate up to 81 per cent from 75 per cent (for PRT fields) and 62 per cent (from 50% for non-PRT fields).

“These changes come at a time when the oil and gas industry is struggling to maintain investment and grant access to its North Sea infrastructure and suffering from reduced exploration and appraisal levels (activity down 9 per cent in 2010 compared to 2009).
“The North Sea tax regime has suffered from constant change over the past 10 years and this ongoing instability is likely to be detrimental to investment.  The UK Continental Shelf needs to be attractive as it is competing against international oil & gas provinces and this latest change will not be helpful.

“The news that tax relief for decommissioning costs has been restricted is unwelcome and will raise further doubts over whether the government will honour its future decommissioning obligations. Combined with the announcements on fuel duty, the changes effectively shift the burden of tax from the motorist to the oil & gas exploration and production companies.”

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