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.
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.
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