BP Chief Urges Cut In Windfall Tax

by Jason Gorringe, Tax-News.com, London

19 January 2006

Speaking at the Royal Bank of Scotland's annual North Sea conference on Tuesday, BP chief executive, Lord Browne urged the UK government to reconsider its 20% windfall tax on the profits of North Sea oil firms, warning that the levy could drive the industry to invest elsewhere.

In his pre-budget report, delivered last month, Chancellor Gordon Brown doubled the supplementary tax on North Sea oil companies to 20%, raising GBP3bn in extra revenue.

Commenting on the move at the time, Lord Browne observed that:

"What we like to see from governments is stability. Anything that changes that is bound to alter the framework for investment."

Speaking to delegates on Tuesday, the BP chief elaborated on this warning, arguing that:

"If a windfall tax is to be applied when prices go up, then the tax should be removed as prices go down."

He went on to add:

"It is worth remembering that profits, including so-called windfall profits, fund just two things. First, the payment of dividends and returns to shareholders who, in our case, are predominantly UK pensioners and those saving for their retirement...The other use of profits is for investment, and there again an increased tax take will mean that the resources available for reinvestment in areas such as the North Sea are reduced."

Energy Minister, Malcolm Wicks, who also attended the conference, defended the tax move, and argued that adjusting the tax as the price of oil rose or fell would be impractical.

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