Brown certain to raise taxes from oil & gas companies, warn auditors |
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Published
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Sat, 29 Oct 2005 00:35
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North Sea oil companies are bracing themselves for a new tax regime as Chancellor Gordon Brown is most certain to expect a windfall from this sector. According to estimates by auditors Ernst & Young, the government could benefit by around £11 billion considering oil prices had surged over the past two years reaching the record level of $70 a barrel earlier this year.
Buoyant oil prices would have boosted profits for oil and natural gas majors, making them obvious targets for tax hikes, the firm warns, especially because Mr Brown is faced with a huge deficit of £11 billion in public finances.
The firm’s head of oil and taxation Derek Leith and tax policy expert Chris Sanger who has been a former Treasury advisor said faced with a spending slump and a slower growing economy, the government would very likely revise the tax regime. Mr Brown could repeat his effort of 2002 of raising taxes on North Sea oil production by 10 percent.
Ernst & Young are financial advisors and auditors to firms which include oil and gas companies that control around 60 percent of the North Sea output.
The likelihood of tax hikes is making companies rethink about adding investment in the region. Investment firm Merril Lynch advises its clients against buying any UK based oil and gas company.
Ernst & Young’s Mr Leith agreed that tax hikes have proved counterproductive in recent years with many oil majors suspending exploration activity and investment in producing fields.
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Gordon Brown: Caught between the devil and the deep sea 