Thought for the day
It’s not often I say this, but well done to the BBC. They produced a low-key but suitably damning piece on the proposal for a windfall tax on energy companies. If you want to find out why such a move is almost impossible to implement, READ THIS.
Witanagemot Blogs
The UK government could put additional tax on the energy companies refining and distribution operations in the UK and extractive activities in the North Sea. Problem is that there is very little profit being made in in refining and distribution in the UK and the companies would have to respond by push prices higher still to get their operations back into profitability. It would also kill further investment in the remaining North Sea opportunities.
The major source of this profit is in oil and gas extraction outside of the UK most of which only comes within the UK tax net when dividends are transferred from the foreign operations to the UK parent (and not at all for non-UK parents). Attempting to grab that would just result in the remaining UK domiciled companies (basically only BP and Centrica left) moving their domicile to another EU state leaving a net loss of tax revenue to the UK Treasury.
The final source of additional profits is the paper revaluation of oil stocks at higher prices, but these will reverse back to losses if and when the oil price falls. With CT carry back provisions the tax would probably be covered by next years stock losses before it was ever paid.
If the government believes it has a case against the companies for overcharging users in the UK operations then they have a (useless) regulator and Competition Commission to deal with it. As a source for tax raising they have no real mechanism that does not have serious adverse future consequences.
Not that it will stop this bunch of socialist lunatics trying.
Thanks for that info, Robert. I know that Gordon Brown has already hammered investment in the North Sea through tax hikes, which has contributed to the low supply of oil over recent years. I do not understand how these idiots can even contemplate hammering these companies again when, as you pointed out, they can just sod off abroad and leave us in even more serious financial difficulties.
Oh wait, I do understand it – Labour don’t understand economics.
They aren’t put off by laws that are impossible to implement, vide the daft booster seat regulations they nodded through under orders from their paymasters in Brussels (what copper is going to manhandle a kid out onto the pavement in the morning rain to measure it?) or the daft HIPS packs which they are too scared to even attempt to enforce and have no real mechanisms to do so. But Labour want this tax out of envy, as they always do, to “hurt fat cats” and people who have the audacity to hold shares. This tax is fox hunting – with private profits being the fox. Remember most of the last few cabinets are – allegedly – “reformed” communists of one colour or another,.