Treasury accused of ‘laundering’ windfall gains to downplay investment risk

A government source admitted: “The main problem with snap taxes is their unpredictable nature. Companies want certainty and a windfall tax can make the difference between a project that goes ahead or not.”

However, an impact assessment last month by HM Revenue and Customs for the Treasury shows that the levy will not hit the economy as it comes with a tax credit on new investments.

The analysis stated that while tax increases could “weigh” the economy, the “measure is structured to encourage affected companies to increase their investment”.

“In general, taking into account these offsetting effects, the measure is not expected to have a significant macroeconomic effect,” it said.

The conclusion has led to claims that the wider impact of the tax on the UK business environment has been ignored.

Need to invest in the North Sea

Deirdre Michie, chief executive of industry association Offshore Energies UK, said there was an urgent need for investment in North Sea oil and gas and offshore wind.

“Sudden changes in the tax system threaten to discourage those vital investments, partly because they reduce profits, but mainly because they damage confidence in the UK as a safe place to invest,” she said.

“The energy profit tax impact assessment said very little about these adverse potential effects and certainly did not reflect the concerns felt in our industry about the potential impact on investment and on the country’s future energy security.”

The tone of the impact assessment contrasts sharply with a similar analysis HMRC made last year on the National Insurance hike, which stated that the tax hike could affect “family formation, stability or collapse” by reducing income. of persons who are “just about financial management”.

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