UK consumers pay dearly for their fuel, mainly thanks to the very high rates of tax on petrol and diesel, and substantial tax on domestic fuels through company tax and VAT as well. In the debate on Scotland’s future the issue of oil and gas tax revenue is more narrowly focused on Petroleum Revenue Tax, a tax on production, and on corporation tax on the producing companies. So what has been happening to this?
The trend of tax revenues on production from the North Sea has bee downwards for sometime. This is another area where the Treasury has been too optimistic in recent years. In June 2010 the Treasury forecast £1.8bn of Petroleum Revenue Tax in 2013-13, and £1.7bn in 2013-14.
Instead they received £1.7bn in 2012-13 and £1.1 bn in 2013-14. Current forecasts are for much lower figures from here than the 2010 estimates.
On June 2010 the Budget forecast £8.7bn of offshore corporation tax revenue in 2012-13 in total, and £8.9bn in 2013-14. Instead the Treasury collected just £4.4 bn in 2013-13, and £3.6bn in 2013-14, or 60% less than the 2010 forecast.
As the oil province declines, so the tax take will reduce substantially. The government is having to offer more tax offsets and lower rates to encourage more marginal production, whilst total volumes decline. Once again past forecasts have been far too rosy about higher tax rates and definitions, forcing not only lower estimates but also a change of policy to a less penal regime.