An independent Scotland would be “unlikely to be able to provide the same level of support” to the oil and gas industry, a leading UK Government minister has claimed as a review of tax arrangements for the industry is launched.
Companies in the sector are being asked for their views on the tax regime as part of a 12-week review announced by Chancellor George Osborne in his last Budget.
The UK Government said it would “explore how the tax regime can continue to encourage investment in the North Sea and help maximise the value of the country’s oil and gas resources for the UK, whilst ensuring the nation continues to receive a fair share of profits”.
It comes as the industry continues to be a key battleground in the Scottish independence referendum and both sides continue to argue over forecasts of future tax income. First Minister Alex Salmond said the oil and gas industry had been “neglected and undermined” by successive UK governments.
But Chief Secretary to the Treasury Danny Alexander accused Mr Salmond of “promising milk and honey” based on oil projections.
Launching its review, the UK Government said tax generated from the industry would “continue to decline over the long term” and that the value came through wider economic benefits such as jobs, skills and exports.
It believes it is best placed to “maximise” the benefits because it can “provide the stability and predictability needed for companies to invest and is able to adopt a long-term approach to the sector because of its broad shoulders”.
Mr Alexander said: “This review offers the opportunity to put the fiscal regime on the best footing to ensure that the economic potential of the North Sea can be maximised for the UK and Scotland.
“The broad and diverse UK tax base means we are able to support the industry through, for example, certainty over decommissioning tax relief.
“A separate Scotland is unlikely to be able to provide the same level of support and risks missing out on the economic potential the North Sea has to offer.”
Mike Tholen, economics director at industry body Oil and Gas UK, has welcomed the tax review.
“The current fiscal regime has become increasingly complicated and unpredictable, with high tax rates combined with a multiplicity of allowances, he said.
“While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate.
“Investors are increasingly looking to invest elsewhere rather than in the UK.”
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