Oil profits

Windfall tax calls ‘misleading public’, says OEUK

Soaring profits have prompted another round of calls for higher taxes

Oil and gas trade body Offshore Energies UK has accused politicians of misleading voters and consumers with calls for further windfall taxes.

Labour politicians have led calls for another increase in the energy profit levy following the record $40bn adjusted earnings announced today by Shell.

Ed Miliband, Labour’s climate policy spokesman, said: “The government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.”

OEUK said that imposing UK windfall taxes on companies’ global profits would breach global tax agreements and so could never be implemented.

Mike Tholen, OEUK’s director of sustainability, said it was wrong to offer false hopes to hard-pressed consumers.

“These calls for extra windfall taxes on profits made outside the UK make no sense and could never be implemented. The UK is subject to global tax agreements which say that it cannot tax profits made by companies outside of the UK. 

“Multinationals like Shell and BP are not single companies but groups with multiple overseas subsidiaries – so most of their profits are made abroad. Subsidiaries based in other countries will pay taxes – but in those countries. The UK cannot then impose a second tax just because the group has its headquarters in the UK. If we did, they would all leave.

“We already have a 75% windfall tax on profits made in the UK – the highest for any industry. 

“It would be invidious for the UK to tax profits made in other countries too. The taxes on those revenues belong to the countries where they were generated.

“It would be wrong for another country’s revenues to be effectively seized by the UK.“Our leading politicians in all parties know very well how global tax law works and we would call on them to avoid these misrepresentations.” 

Shell delivered a record $39.9 billion profit (adjusted earnings) in 2022, doubling from a year earlier and far exceeding the previous record of $31bn in 2008.

It follows a year in which Russia’s invasion of Ukraine boosted shareholder returns.

The company posted a record fourth-quarter profit of $9.8bn on the back of a strong recovery in earnings from its liquefied natural gas (LNG) trading, beating analyst forecasts for an $8bn profit.

Shell announced a 15% dividend per share increase for the fourth quarter and a new $4 billion share buyback programme over the next three months.

Chief executive Wael Sawan said: “Our results in Q4 and across the full year demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world.

“We believe that Shell is well positioned to be the trusted partner through the energy transition.”

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “Shell’s record profit for the year will only intensify calls for more to be done to claw back profits from energy companies in the current environment.

“The politics of it all aside, the events of the last year have seen Shell’s earnings, cashflow, and debt position improve significantly and shareholders are benefitting through another share buyback programme and an increased dividend.

“Looking ahead, however, investors will want a sense of what the future strategic direction of the company will be under the new CEO.”

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