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OEUK comment: Shell profits announcement and calls for new windfall taxes

2 February 2023

Reuters has reported calls by Labour politicians for another increase in the windfall tax, linked to Shell’s latest global profits announcements.

Offshore Energies UK, the trade body for the UK’s offshore energy industries and supply chain companies, said calls by politicians to impose UK windfall taxes on companies’ global profits risked misleading voters and consumers. This is because any such levy would breach global tax agreements and so could never be implemented.

Mike Tholen, OEUK’s director of sustainability, said it was wrong to offer such false hopes: “These calls for extra windfall taxes on profits made outside the UK make no sense and could never be implemented. The UK is subject to global tax agreements which say that it cannot tax profits made by companies outside of the UK.

“Multinationals like Shell and BP are not single companies but groups – with multiple subsidiaries. Subsidiaries based in other countries will pay taxes – but in those countries. The UK cannot then impose a second tax just because the group has its headquarters in the UK. If we did, they would all leave.

Mike Tholen, OEUK Sustainability Director

“We already have a 75% windfall tax on profits made in the UK. It would also be invidious for the UK to tax profits made in other countries too. The taxes on those revenues belong to the countries where they were generated. It would be wrong for another country’s revenues to be effectively seized by the UK.

“Our leading politicians in all parties know very well how global tax law works and we would call on them to avoid these misrepresentations.”

Notes to Editors:


These notes aim to address a common confusion regarding the relationship between global profits and UK taxation.

This confusion arises from the assumption that profits from global operations are subject to UK taxes.

This has led some journalists (and policymakers) to suggest that UK taxes like the Energy Profits Levy (or windfall tax) are applicable to the global profits announced by companies based or operating in the UK.

This assumption is incorrect. Here’s why:

  • Most multinationals are not single companies but groups – with multiple subsidiaries
  • Some of those subsidiaries will be generating their profit outside of the UK.
  • Subsidiaries based in other countries will pay taxes – but in those countries, not the UK.
  • All companies produce audited annual accounts for the group as a whole and for each subsidiary.
  • Group level accounts cover overall profits (or losses) from all countries where a given business is operating.
  • Some companies also publish quarterly unaudited accounts. This is obligatory if they are US-listed.
  • Global tax agreements mean companies cannot be taxed twice on the same income in different countries.
  • They also say profits cannot be diverted from eg the UK to low-tax paying regions.
  • For oil and gas producers this means the relevant UK taxes (Corporation Tax, Supplementary Charge and the EPL) apply only to profits made on oil and gas extracted in UK waters.
  • The combined rate of these taxes is 75% – the highest rate for any UK sector.
  • These UK taxes will apply to profit earned by foreign-owned companies operating in UK waters.
  • They will not apply to profit earned by subsidiaries of UK companies operating overseas.

Key Points:

  1. It is inaccurate to suggest that UK taxes are applicable to global profits.
  2. The UK Treasury can only tax a company’s profit made from its UK operations.
  3. It cannot tax revenues generated in other countries – because they have already been taxed in those countries.
  4. For larger (global) oil and gas producers, UK operations will typically be just a fraction of their overall portfolio.

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