Aberdeen and Grampian Chamber of Commerce (AGCC) has
urged the chancellor to cut the tax rate for the oil and gas industry in his Autumn Statement.
In its submission to the Treasury’s oil and gas tax review, AGCC warned it may be the last chance for action before companies abandon wells, remove infrastructure and leave the UK North Sea.
Its response to the review was developed with input from operators involved in exploration and production, both in the UK continental shelf (UKCS) and globally, and reflects concerns that the current fiscal regime does not take into account the maturity of the basin and the risks involved in investing in the area.
AGCC research and policy director James Bream said: “Operators tell us the UKCS fiscal regime is unpredictable, unnecessarily complex and simply too burdensome.
“In a mature basin, the industry must cut costs, innovate and increase collaboration, but it cannot work in isolation of government. A consistent, fair and stable tax regime is crucial.
“Companies are not convinced they can get a fair return on their investment and in a global industry it is very simple for them to move their capital elsewhere.”
AGCC’s most recent oil and gas survey showed a significant drop in confidence levels within the industry following the 2011 Budget tax changes.
In George Osborne’s forthcoming Autumn Statement, it is looking for a commitment to an immediate cut in the headline rate of taxation from 62% to 50%, a “simplification and rationalisation” of allowances and incentives for companies investing in existing fields.
It also wants encouragement for exploration investment and “the avoidance of any changes which add complexity to the fiscal regime”.
AGCC warned that inaction will lead to a faster decline in the industry than necessary, premature decommissioning, and a reduction in long-term revenue for the Treasury.
Mr Bream said: “We feel that this cut in the tax rate would create a new level of trust and act as a clear statement of intent from the (UK) Government that they are committed to maximising economic recovery from the UKCS.”