Falling oil and gas prices 'will lead to drop in Windfall Tax revenue'

28 Jun 2023

Figures published by the Treasury have suggested that falling prices for oil and gas will lead to a significant drop in revenue from the Energy Profits Levy, also known as the Windfall Tax.

The Energy Profits Levy is a windfall tax on energy company profits. Introduced in May 2022, it was set at 25% but was increased to 35% at the Autumn Statement. Companies in the energy sector are therefore subject to an overall tax rate of 75%.

The Treasury recently announced that the Energy Profits Levy will stay in place until 2028, but could be scrapped if oil and gas prices fall to historical levels for a significant amount of time.

However, experts have warned that the chances of prices falling to a level low enough for the tax to be ditched are 'extremely low' as a result of changes to the supply and demand for energy following the conflict in Ukraine.

Gilad Myerson, Executive Chair of oil and gas operator Ithaca Energy, said: 'The taxation regime is changing constantly and it's very difficult to invest huge amounts of capital when you don't know what type of return you'll be getting.'