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Shell in talks with Government as ministers consider new windfall tax

The Telegraph

Shell in talks with Government as ministers consider new windfall tax

Oil and gas giant did not pay any tax in Britain, despite an existing windfall scheme

By Rachel Millard: 27 October 2022 • 5:48pm

Shell is in talks with the Government as ministers consider a fresh windfall tax on oil and gas companies to help fill a £35bn black hole in the public finances.

Ben van Buerden, chief executive of the oil and gas giant, said he accepted the case for higher taxes after the industry was boosted by surging fossil fuel prices following Vladimir Putin’s invasion of Ukraine.

It came as Shell posted global quarterly profits of $9.45bn (£8bn), more than double a year earlier.

However, the company did not pay any tax in Britain, despite an existing windfall scheme, because it took advantage of a rule which means the amount owed to HMRC is reduced if a company invests in new UK drilling projects.

On Thursday, Mr van Beurden conceded there was a case for windfall taxes, but said that producers should be “at the table” to make sure any new taxes were designed in a “correct and appropriate” way.

Asked if Shell was actively engaging with the Treasury about the design of any additional UK taxes, Mr van Beurden said: “We have spoken with the Government many times in the lead up to the levy  put in place by the then-Chancellor earlier in the year.

“I am absolutely certain that we are indeed in continuous dialogue with the Treasury on these matters, in a constructive way.

“But not me personally, at this point in time. I would imagine that moment may still come. But of course, I’m also very mindful that it’s a very busy time at this stage for the Government.”

It came as the prime minister’s spokesman said “no options are off the table” ahead of Chancellor Jeremy Hunt’s autumn statement on November 17.

The Government hiked taxes on North Sea oil and gas producers from 40pc to 65pc in May, but is under pressure to go further given ongoing pressure on household bills, which are now being heavily subsidised by taxpayers.

Mr van Beurden added it was “sensible” and a “societal reality” that governments will try to help people struggling with high prices.

He said: “I think therefore [it’s] also a societal point we have to accept that governments will raise taxes for that.

“Therefore I think we should be prepared and accept that our industry will be looked at for raising taxes in order to fund the transfers to those who need it most in these very difficult times. We should not be surprised. We should be helping governments to design the right policies.”

The higher tax rate enacted in May includes an investment allowance for oil and gas production. It is set to run until 2025 unless prices normalise before then.

Shell said it did not yet owe any taxes under the new levy, having not made a profit in the UK since 2017 because of its investments.

Finance chief Sinead Gorman said she expects the company to start owing taxes under the new levy next year, depending on prices.

The value of Shell’s UK deferred tax liabilities, which it can use to offset against profits, has also fallen by almost $400m due to the higher rate.

Shell’s $9.45bn quarterly profit figure is slightly less than in the second quarter, but more than double the figure in the same quarter last year.

Oil and gas producers have benefited from surging prices since Russia’s war on Ukraine, which has led to gas shortages due to cuts in Russian supplies.

In May, Shell warned that the introduction of the higher UK tax rate created uncertainty over investments in the North Sea.

Since then, countries including Germany, the Netherlands and Italy have or plan to bring in windfall taxes on energy producers.

Mr van Beurden added: “A lot of people would say, the best remedy against high prices is high prices.

“The reality is, what we are seeing today, is that many many people in society, particularly of course the most vulnerable, are suffering very badly as a result of it.”

He is due to step down as chief executive at the end of this year after nearly a decade in charge.

A Government spokesman said: “The Energy Profits Levy – which comes on top of an existing 40pc headline rate of tax for the industry – is expected to raise £17bn this year and next to help fund cost of living support for 8m people.

“We also want to see the sector reinvest its profits to support the economy, jobs, and our energy security, which is why the more investment a firm makes into the UK, the less tax they will pay.”

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