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North Sea Neighbors on Opposite Ends of Shell’s Tax Bill

North Sea Neighbors on Opposite Ends of Shell’s Tax Bill

By Laura Hurst: 17 November 2020, 11:21 GMT: Updated on 17 November 2020, 13:14 GMT

  • Energy giant gets money back from Britain for a second year
  • Norway, however, taps company for more than $1 billion

Royal Dutch Shell Plc pumps thousands of barrels of oil and gas from the North Sea every day. In Norway the energy major paid over a billion dollars in tax last year, but on the U.K. side, it got more than a hundred million dollars back.

The discrepancy reflects contrasting government policies and spending by the oil and gas giant. In Norway, Shell had an effective tax rate of 78%. In Britain, it paid no corporation tax because of losses tied to investments in new North Sea fields. It also earned rebates from dismantling old platforms in the region.

In total, the London-listed major paid $7.8 billion in corporate income tax and a further $5.9 billion in royalties globally last year, it said in a report. The Sultanate of Oman made up the lion’s share, receiving $2.89 billion, while Norway was the second-largest recipient. Shell got back $116 million from the U.K. government, similar to a year earlier.

As North Sea fields reach the end of their economic life, they’re decommissioned, and the U.K. government is hit with a double-whammy: it gives out tax credits, while also receiving less money from taxable oil and gas sales. The country’s tax authority expects to pay 9.4 billion pounds ($12.5 billion) to companies incurring losses from decommissioning expenditure through to 2065, it said in its annual report and accounts.

In Norway, Shell paid $1.09 billion in tax to the government last year, as well as $1.9 billion in production entitlements and fees. The company is involved in 34 licenses in the Nordic country and operates 14 of them. Its revenue there fell to around $2.5 billion last year following the sale of two fields.

In the U.K., where Shell has almost 6,500 employees — 13 times more than in Norway — the company had revenue of $92 billion.

Shell’s report is the second time it has published its corporate income tax by country. The company says it has a “tax presence” in 99 nations and locations, filing 43,000 tax returns annually.

Shell has reviewed its presence in low- and zero-tax jurisdictions, ending some activities in Switzerland and Bermuda, Chief Financial Officer Jessica Uhl said in the report. The Anglo-Dutch major ended intra-group lending in Switzerland in 2019 and ceased lending activities in Bermuda this year.

Aside from the U.K., treasuries in France, South Africa and Indonesia also returned money to Shell last year.

(Updates with U.K. tax authority’s expected payouts for decommissioning in fourth paragraph.)
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