Oil & Gas UK Economic Report 2015

6.2 Fiscal Contribution

(see Figure 19). The latest HM Treasury projections indicate tax receipts of £2.2 billion in the fiscal year 2014-15, which is expected to decline further to just £0.5 billion by 2021 6 , based on current forward oil prices. Oil & Gas UK has estimated tax receipts paid by the UK supply chain from two main sources: corporation tax and value added tax (VAT) plus payroll (PAYE and employer’s national insurance contributions). Based on the latest figures available 7 , the supply chain’s corporation tax contributions in 2013 are estimated at over £1 billion and payroll contributions are estimated at over £1.5 billion, totalling circa £2.5 billion.

1

Since 1970, direct taxes from the production of oil and gas have totalled more than £330 billion to end 2014. Tax rates have ranged widely over the years and have not always reflected the UKCS’ profitability. They have, however, begun to fall since the last increase in 2011 (as detailed in Section 7.5 under promoting investment). UKCS production tax receipts have fallen sharply since reaching £14 billion in 2008-09 in 2014 money, reflecting the decline in production, increased costs of operating the basin and also the ability to immediately offset capital allowances in full against taxable profits

2

3

Figure 19: Production Tax Revenues and HM Treasury Forecast

4

5

Royalty Supplementary Charge

35

30

Ring Fence Corporation Tax Advanced Corporation Tax Supplementary Petroleum Duty Petroleum Revenue Tax

25

6

Summer Budget 2015 Forecast (nominal)

20

15

7

10

5

(£ Billion - 2014 Money)

8

0

-5

Government Revenues from UK Oil and Gas Production

9

1968/69

1970/71

1972/73

1974/75

1976/77

1978/79

1980/81

1982/83

1984/85

1986/87

1988/89

1990/91

1992/93

1994/95

1996/97

1998/99

2000/01

2002/03

2004/05

2006/07

2008/09

2010/11

2012/13

2014/15

2016/17

2018/19

2020/21

Source: HM Treasury, Office for Budget Responsibility

10

6 See the summer Budget 2015, p.108, at http://bit.ly/1Ma6zZj 7 The projections are based on Oil & Gas UK’s interpretation of data provided in The UK Upstream Oil and Gas Supply Chain – Economic Contribution (April 2014), published by EY at www.ey.com

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ECONOMIC REPORT 2015