Scotland Has No Plans To Increase Oil Tax Burden
26 July 2013
Posted by: Author: Amanda Banks
Author: Amanda Banks
The Scottish Government has published a paper on the oil and gas industry in Scotland, in which it confirms that it has "no plans" to increase the tax burden on the industry in an independent Scotland and that it will commit to formal consultation before any changes are made to the fiscal regime.
The paper, entitled Maximizing The Return From Oil And Gas In An Independent Scotland, will provide the framework for an expert commission on the industry to be appointed next month.
The report also accuses the UK Government in Westminster of causing "fiscal instability" in the sector through tax changes, and contrasts the UK unfavorably with the tax regime in Norway. In particular, it highlights measures in the 2011 Budget which increased the Supplementary Charge to 32 percent and capped decommissioning tax relief, which the report says was implemented without consultation with the industry. The report claims that the moves made North Sea projects less competitive, and caused investor uncertainty.
Outlining the industry's potential, the report suggests that, based on current production, an independent Scotland could produce six times its domestic oil demand and three times its domestic gas demand. It highlights that there is thought to be around a further 24bn barrels of oil and gas in the North Sea, with a potential wholesale value of GBP1.5 trillion, and that research suggests that 98.8 percent of oil production and around 60 percent of gas production over the next three decades will take place in Scottish waters.
It adds that 200,000 people are currently employed in the sector, either directly or indirectly, that companies are planning to invest at least GBP100bn, and that offshore revenues lift Scottish tax receipts to GBP1,700 per person higher than across the UK. However, it also notes that tax receipts currently account for a smaller proportion of revenue than is the case in a number of other major oil-producing nations.
The report also lays out the case for an "oil fund," which was announced by the Scottish Government in May. It points out that an oil fund established in Norway in 1990, and which has received payments since 1996, now has a fund worth GBP450bn, and is the largest Sovereign Wealth Fund in the world. The report argues that an oil fund for Scotland "would promote economic responsibility and stability," and provide long term benefit to Scotland's population.
Although some tax-setting powers are currently being devolved to Scotland, the UK government is opposed to the devolution of corporation tax. The Scottish Government's plans can therefore only be implemented should Scotland vote for independence during autumn 2014.