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.
- 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.
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“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