Memorandum submitted by Oil & Gas
UK
EFFECT OF
TAX INCREASE
ON THE
OIL INDUSTRY
Thank you for your letter regarding the Scottish
Affairs Committee's inquiry into the impact of the tax increase
on UK industry; we particularly appreciated the inclusion of the
complete copy of the evidence provided to the Committee.
Whilst we welcome the opportunity to review
the evidence we presented to the Committee, we remain of the view
that the competitive position of the UKCS has been prejudicied
by the tax increase introduced in December 2005. The UK is a mature
high cost oil province which will always struggle to compete against
more prospective opportunities elsewhere in the world. The tax
increase places an extra burden on the UKCS on top of the rapidly
rising costs of operating in this basin.
The spate of tax changes over the last half
decade has added to the reputation of the UKCS for Fiscal stability.
This is reflected by Wood Mackenzie in their recent independent
study on comparative oil and gas tax regimes which shows the UK
to rank poorly on such measures.
I am however pleased to say that we are in the
middle of ongoing discussions with HM Treasury regarding the future
evolution of the North Sea tax regime. We hope that these will
address industry concerns regarding the future of PRT, the fiscal
treatment of decommissioning and the need to provide an appropriate
balance taxation and investment if we are to maximise the economic
recovery of the UK's oil and gas reserves.
Malcolm Webb
Chief Executive
Oil & Gas UK
2 October 2007
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