The windfall tax has recently been discussed in several countries around the world. In an earlier article, we informed you about India, for example, which introduced this tax on energy companies in July. A recent announcement about the introduction of this tax also came from Greece.
Among the first countries to implement the windfall tax was the United Kingdom. However, the current setup is not enough for this island state and so it is increasing the level of taxation.
The tax will increase on oil, gas and also electricity
In a close-up Budget statement released, UK Chancellor of the Exchequer Jeremy Hunt unveiled a plan to increase the windfall tax on North Sea oil and gas operators. The levy will increase by 10% to 35%, with an extension until the end of March 2028. Other companies affected by the new regulation will be producers of cheap electricity. For them, however, the increase will be another 10% higher.
“The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. The Energy Profits Levy will be increased by 10 percentage points to 35% and extended to the end of March 2028, and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.”
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The increased tax on oil and gas companies will apply from 1 January 2023 and is expected to bring in more than £40 billion by 2028. A further approximately £14.2 billion is then expected to be received by the government from producers of cheap electricity.
Does this have any risks?
Commenting on the new Budget measures, the UK Government said.
“The Autumn Statement will set out reforms to ensure that businesses in the energy sector that make extraordinary profits contribute more.”
The question is whether this tax increase will result in investment being driven out of the islands. At the moment, we can say that some investment will certainly be withdrawn, but we cannot say at what amount.
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