Tax on energy profits: TotalEnergies sanctions the UK

Taxing energy company profits may scare some away. Witness the TotalEnergies group’s decision to cut some of its planned investments in the UK North Sea by a quarter next year.

It is about the increase of a tax on energy benefits. The government, which was put in place last May, announced at the end of November that it will increase from 25% to 35% and be extended for three years until 2028. London thus intends to involve companies which have seen their profits rise with the energy boom since the start of the war in Ukraine.

Although there is still an opportunity to reduce this tax in return for investment, which is strongly criticized by environmentalists, it is now much more of an incentive for low-emission projects and less for oil and gas projects.

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100 million pounds less

TotalEnergies’ reaction was swift: in a statement sent to AFP on Friday, Jean-Luc Guiziou, head of the group’s UK exploration and production subsidiary, indicated that the group assessed the impact on its current and planned projects » of one ” new changes in the tax environment » The United Kingdom. For 2023 alone, our investments will be reduced by 25% », he said, confirming comments published Thursday in Energy Voice. This is £100m less than previously planned for next year.

Among the investments that TotalEnergies has abandoned is, in particular, a project in the Elgin field off Aberdeen in Scotland, fill well »drilling added to existing wells to enhance hydrocarbon recovery.

Other energy companies have announced that the increase in this tax will force them to review their investments in the country, as has Shell.

This is a real turnaround for the British giant, whose boss, Ben van Beurden, had nevertheless estimated in October that a major contribution from the sector to the protection of the households hardest hit by the energy increase was a social reality » who should have accept ».

A new budget under the sign of austerity

Faced with criticism from tankers, a UK government spokesman responded just last Friday, explaining that this increased tax is in line with other European countries, such as Italy “.

He added:

If investments are the choice “of each company”, the British government “considers it right that those with the broadest shoulders (…) contribute the most, so that we can continue to support the vulnerable ».

The oil group could have hoped to escape it, as the conservative majority has long resisted the introduction of this tax, for fear of discouraging investment in the sector in the midst of an energy crisis. But the need to fill the state’s coffers finally got the better of his reluctance, and the majority sided with the Labor opposition and the NGOs who actively campaigned for this tax.

As a reminder, British Chancellor of the Exchequer Jeremy Blunt presented a new budget on November 17, taking the opportunity to announce the increase in tax on energy giants’ profits from 25% to 35%. should also see the light of day “a new temporary tax of 45% on electricity producers”. In total, this new UK budget is based on £55bn of tax increases and cuts in public spending.

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The EU’s “temporary solidarity contribution”

Britain is not alone in wanting to tax profit-making energy companies more. The European Commission launched at the end of September a temporary solidarity contribution » on these profits, set at 33% of the share of the 2022 profit, which is more than 20% higher than the average for the years 2019-2021.

TotalEnergies, which announced a new record third-quarter profit of $6.6 billion, estimates it would have to pay €1 billion in six European Union countries in 2022 if this contribution were applied everywhere. That could easily be the case in France. This contribution has actually been translated into the 2023 budget proposal currently under consideration.

At the moment, in France, the idea of ​​taxing the “super profits” of large companies more generally is systematically rejected, as was the case again at the end of November by the Senate.

(With AFP)