Falling oil and gas prices 'will lead to drop in Windfall Tax revenue'

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28 Jun 2023

Figures published by the Treasury have suggested that falling prices for oil and gas will lead to a significant drop in revenue from the Energy Profits Levy, also known as the Windfall Tax.

The Energy Profits Levy is a windfall tax on energy company profits. Introduced in May 2022, it was set at 25% but was increased to 35% at the Autumn Statement. Companies in the energy sector are therefore subject to an overall tax rate of 75%.

The Treasury recently announced that the Energy Profits Levy will stay in place until 2028, but could be scrapped if oil and gas prices fall to historical levels for a significant amount of time.

However, experts have warned that the chances of prices falling to a level low enough for the tax to be ditched are 'extremely low' as a result of changes to the supply and demand for energy following the conflict in Ukraine.

Gilad Myerson, Executive Chair of oil and gas operator Ithaca Energy, said: 'The taxation regime is changing constantly and it's very difficult to invest huge amounts of capital when you don't know what type of return you'll be getting.'