As Brent crude hit $71 per barrel, after a whole year of prices well above production costs, Shell have reported a 47% increase in profits to $3.9 billion.
Readers will remember that Shell paid no tax in the UK in 2016 but, rather, were subsidised by the Westminster Government. In the same year, they paid tax in every almost every other country they operated in. They paid Norway more than $4 billion dollars when Brent prices were as low as $27.26 per barrel! See this graph:
Though presented uncritically by the UK media as being a consequence of low prices and increasing costs, analysis of the UK’s North Sea oil and gas suggested that the combination of tax giveaways by the government, and aggressive avoidance by multinationals, meant that the UK might actually have been subsidising the extraction of its natural resources. A report published by the International Transport Workers’ Federation (ITF) set out a series of shocking statistics on the UK’s failure to obtain an appropriate share of its own resource wealth. Among them, these stood out:
- In 2014, UK consumers paid 6 times more tax on petrol, excluding VAT, than the North Sea oil and gas industry paid on all taxes related to production.
- Chevron’s effective tax rate in 2014 on earnings from North Sea production was 5.4%; statutory tax rates (of various types) on oil and gas should have totalled 61-82%.
- In 2014, 3 (Shell, BP & Total) of the top 4 North Sea producers produced more than £4.3 billion worth of oil and gas and received over £300 million in net tax refunds.
The ITF argued that while the oil sector had successfully lobbied for and won huge tax breaks from the UK government, the companies involved continued to pursue aggressive tax avoidance as standard practice. The report on Chevron provided a detailed case study of tax dodging tactics which were replicated by others, particularly Nexen – on which the Times had a frontpage splash, using ITF analysis to show that the Chinese government-backed company received tax credits of £2 billion.
Reported in Energy Voice yesterday:
‘Fund management experts at Hargreaves Lansdown recently praised Shell’s tactics since the oil price rout in 2014, including an aggressive cost-cutting drive and a 30 billion US dollar (£21 billion) divestment initiative. They said: “This has left the group much more strongly cash-generative and reinforced Shell’s dividend-paying capabilities. Historically, Shell has an unparalleled track record for paying its dividend through thick and thin, having maintained or increased it every year since the end of the Second World War.”’
Note the confidence in paying out to shareholders but no mention of tax revenues. Note also, that Shell were able to pay dividends ‘through thick and thin’ including presumably 2016, when UK taxpayer subsidies of $123 million were available for that purpose.
Surely, we tax them now?