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 Wednesday, 17 April, 2002, 21:03 GMT 22:03 UK
Oil firms attack 'give and take' budget
North Sea platform
The North Sea tax structure is very complicated
The North Sea oil industry has reacted with alarm to Chancellor Gordon Brown's decision to slap a 10% surcharge on profits.

This supplement, which will take some 500m out of the North Sea industry in a full year, will be a serious threat to jobs

Alex Salmond, SNP
In his budget speech earlier on Wednesday, Mr Brown said he would abolish the "royalty" payment on North Sea Oil.

He also announced plans to improve capital allowances for oil companies.

But he spoiled the party for oil producers by slapping an extra 10% tax on UK oil production, taking it to 40% to "raise revenue".

The net result of these changes to the complex North Sea tax regime is likely be a greater share of oil income going to the government.

'Investor confidence'

The UK Offshore Operators Association, which represents more than 30 offshore organisations and companies, said the Budget was one of "give and take".

A spokeswoman said: "While the UK offshore industry welcomes the chancellor's provision to increase capital allowances in first-year investment in the North Sea, it is disappointed at the decision to introduce a 10% supplementary charge on profits.

"We believe this could undermine investor confidence in the long-term viability of the UK Continental Shelf."

Labyrinthine

The industry has a labyrinthine tax structure, with different developments supplying varying levels of revenue to the chancellor depending on their age.

Some fields going back 20 years or more can pay as much as 70% in various levies, while modern developments are taxed at a lower rate.

UKOOA said it was too early to ascertain the impact of proposals to possibly scrap royalties on North Sea oil which are levied on older fields.

The spokesman said: "His proposal to consult the industry on the abolition of royalties applies to mature fields developed before the end of March 1982.

"It will take some time to analyse the impact of the full tax package on the industry."

Urgent consultation

Alex Salmond, the leader of the Scottish Nationalist Party at Westminster, said the tax supplement on profits was a threat to offshore jobs in Scotland, which was at the centre of the UK's industry.

"This supplement, which will take some 500m out of the North Sea industry in a full year, will be a serious threat to jobs.

"Because Scotland is deprived of the North Sea tax, Gordon Brown will get the revenue while Scotland will lose the jobs."

Mr Salmond said he would be consulting urgently with the industry to assess the impact of the new tax

  WATCH/LISTEN
  ON THIS STORY
  The BBC's Mark Mardell
"This was the budget Mr Brown had wanted to make for years"
  The BBC's Richard Bilton
"NHS staff say money alone is not the answer"
 VOTE RESULTS
The Budget: Has the chancellor got it right?

Yes
 43.20% 

No
 56.80% 

25637 Votes Cast

Results are indicative and may not reflect public opinion


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See also:

13 Feb 01 | Politics
17 Apr 02 | Politics
16 Apr 02 | Politics
14 Apr 02 | Politics
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