The theft called EPSToday 08:53
Consider the following:
An oil company (before any kind of windfall event) habitually makes a profit before tax (pbt) of £100m. The "normal" oil price (Brent Crude - BC) that has allowed this company to make £100m pbt is $70 per barrel (pb).
A windfall event occurs (eg Russia invade Ukraine) and BC increases to $80pb.
Before the windfall event the oilco paid 40% tax on its profits ie £40m.
The Govt sees a chance to get its greasy hands on some money from a sector that's unpopular, possibly also picking up some cheap votes from people who don't understand anything, or are ignorant, virtue-signalling, sniveling runts - the kind any normal person would hate (I do). So Gov't pretends it's in everyone's best interests - and it's fair too (not sure to whom) - to impose a tax rate of 78% on all the profits of those dirty upstream oil producers. "Hoorah", cry the thickos (92% of the UK population). So, what's the pbt and tax situation now?
With BC @ $70pb the oilco made a pbt of £100m.
With BC @ $80pb, on the face of it, that £100m would increase to £114m. It isn't quite that simple, but I'm only dealing in principles and applying some broad numbers. Some would say: "hang on a minute, lifting costs and overheads won't increase just because BC does, so the oilco will make more than £14m extra". "Fair enough" I say, "so to compensate, let's forget about the fact that expenses like decommissioning, interest and capital allowances are all disallowed (ie oilcos can't deduct them from pbt)". I'll stick with my £14m extra pbt
What would the tax payable @ 40% have been on a pbt of £114m? Answer: £114m x 40% = £45.6m
And what will it be now, with EPL set at 78%? Answer: £114m x 78% = £88.9m
The difference? £43.3m.
So, additional (windfall) profit of £14m has led to additional tax of £43.3m
What rate of windfall tax (wft) does this mean the oilco is paying. Answer: 309%
Yes, that's right - 309% (43.3/14 x100) = 309
WTF is the oil industry playing at? Why isn't it shouting this from the rooftops? The rate of wft of course varies depending on the BC price. The Gov't has told us what a "normal" BC price is (it isn't btw - they've taken the average of the last however many years without taking any account of the years BC was in the gutter as a result of the Saudis opening the taps to hit the US frackers and, of course the Covid years).
I've lived for quite a long time and had a lot of experience. I don't think I've ever come across anything more dishonest than this tax, or anyone as devious as these politicians. Just shows how desperate things have become at the Treasury.
Irony is, it will lead to a lot less tax revenue in the medium to long term, as project after project is deferred, or cancelled altogether. Plus, fields will be decommissioned earlier - double the tax rate, halve the economic life. It isn't rocket science.
"That's for future politicians to fix". "We want money NOW. Don't care how we get it".