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The UK treasury will get a boost from big oil’s tax payments for the first time in years as high energy prices send companies’ profits surging.

The payments will come at a time when energy firms are under fire in Britain as their record earnings sit uncomfortably next to the soaring cost of living for households. Activists and politicians renewed calls for a windfall tax after Shell and BP reported enormous profits this week, but UK Prime Minister Boris Johnson appeared to rule out such a move. 

The companies, like many oil and gas producers in the UK, typically pay no corporation tax in Britain because of losses tied to their investments in North Sea fields. They also get rebates for dismantling old platforms in the ageing basin, meaning they receive more from the government than they pay out. Shell’s tax bills have been offset by credits for every year since 2015, with the exception of 2017.

“We will pay tax this year,” CFO Sinead Gorman said in an earnings call on Thursday. “And clearly I expect that we will be paying hundreds of millions in the UK in years to come.”

Still, that may not end demands for the windfall levy. Such a tax “would be the fastest and fairest way to ease pressure on households” and pay for making homes warmer and more energy efficient in the UK, Greenpeace campaigner Philip Evans said in a statement following Shell’s stellar earnings on Thursday.     

BP paid about $42m tax in the UK in 2020, after receiving rebates every year since at least 2015. The company anticipates a bill of between £1bn £1.5bn this year related to its North Sea profits. “BP will likely pay — at these prices — four to five times the amount of tax that it has paid over many, many years,” CEO Bernard Looney said in an interview on Tuesday.

Bloomberg News. More stories like this are available on bloomberg.com


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