Pressure mounts on Chancellor
Tax help for troubled oil industry ‘now a matter of priority’
Alan McCrae, energy tax partner at PwC, joined the chorus of opinion demanding early action to avoid a catastrophe.
His comments came as Talisman Sinopec announced 300 jobs were to go in the region while Baker Hughes said 7,000 jobs will be axed worldwide. The cuts follow 300 jobs being lost at BP and 9,000 globally who work for Schlumberger.
The mounting losses are putting pressure on the Chancellor George Osborne to take early action to cut taxes and encourage companies to commit to the North Sea.
Mr McCrae echoed calls from Scottish First Minister Nicola Sturgeon and energy minister Fergus Ewing who have called for tax changes before the Budget in March.
Mr McCrae said: “The dramatic drop in oil prices is accelerating efforts already under way to support the oil industry and government is also looking to see what more can be done. The planned Investment Allowance to stimulate investment is now a matter of priority.”
He said other potential measures include a drop in the tax rate back to 50% which was the rate the UK government inherited before it raised it in 2011 when oil prices were almost double what they are now.
Another option would be to ease the cash flow burden for the payment of tax. Oil companies pay more tax up front than other companies and they may now be put back on the same footing as everyone else in order to help with the 2015 cash crunch the industry is facing.
The government could also offer cash help for exploration, a reduction in tax rates for the use of infrastructure such as pipelines in order to give an incentive to companies to invest in this important area, and support for the oil services sector in order to help control costs.