5 Effects of tax increases on the
oil industry
15. Between June and October 2006, we had taken oral
evidence in three sessions (including one in Aberdeen) on the
Effects of tax increases on the oil industry. We called
these sessions after major changes in the North Sea fiscal regime
had been implemented. We heard from representatives of the oil
industry and officials from the Treasury, as well as receiving
written evidence from specialists.
16. By the summer of 2007, we understood that the
Treasury and the industry were engaged in dialogue regarding the
North Sea fiscal regime. We asked both parties whether they had
anything to add to the evidence that we had taken in the previous
year and received responses describing the positive engagement
that was now in place. We therefore proceeded with the publication
of our Report, welcoming the constructive relationship that had
emerged.[12]
17. Our Report concluded that there was a perception
of fiscal instability within the industry, although the actual
effects of any tax increases would be difficult to isolate from
other factors, such as the nature of the oil and gas fields, the
underlying geology and future oil and gas prices. We recommended
that any further changes to the fiscal regime should seek to improve
stability and predictability, without harming the UK's already
competitive position or depriving the UK Government of a fair
share in the economic rent from the exploitation of its natural
resources. We also concluded that changes to the tax system should
aim to make the system simpler to administer both for companies
and HM Revenue and Customs. A simple regime that is consistent
and predictable will be of most benefit to the industry and the
UK in the long term.
12 Scottish Affairs Committee, First Report of Session
2007-08, Effects of tax increases on the oil industry,
HC 35. Back
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