Windfall taxes

In this interview with BBC News, Dr Carole Nakhle, CEO of Crystol Energy, comments on the calls for windfall taxes to be imposed on energy companies as they report record profitability.

Dr Carole Nakhle comments on the calls for windfall taxes to be imposed on energy companies as they report record profitability

Key takeaways:

  • Taxes are an important revenue generation mechanism for governments but they are also a key tool to alter behaviour including encouraging investment in both oil and gas and green projects. It depends on how the system is designed and implemented.
  • If high profits should trigger higher/new taxes, then wouldn’t the reverse logic apply when prices and profits decline? Experience shows that governments are quick to introduce/increase taxes when oil prices increase and very slow at removing/reducing them when prices decrease.
  • A well designed fiscal system can capture additional profits – the so-called windfall – automatically, without the need for continuous tinkering by governments which in turn damages fiscal stability – one key principle of a good fiscal regime.
  • Companies are making such profits because of high prices which are determined in global markets and what they are producing is still in popular demand.
  • Oil and gas taxation is more complicated than what many politicians make it sound.

Related Analysis

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Related Comments

What is the Outlook for Commodities in the Wake of Peak Inflation & Peak Rate Tightening Cycle in 2023?“, Dr Carole Nakhle, Jan 2023

Outlook for oil and gas markets for 2023“, Dr Carole Nakhle, Jan 2023

UK expands windfall tax to 35% for oil and gas companies“, Dr Carole Nakhle, Nov 2022

Shell’s 2022 Third Quarter Profits“, Dr Carole Nakhle, Oct 2022

Record profits for oil-producers“, Dr Carole Nakhle, Aug 2022

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