OVER the last few years, the UK Government has undertaken reform to the oil and gas tax system.
There was a reduction in the petroleum revenue tax (PRT) rate from 50% to 35%, there was a cut to the supplementary charge, and a new investment allowance.
However, with the oil price continuing to sit below $42 since the start of 2016, oil and gas operators had told the Chamber that more needed to be done to encourage investment in the UK Continental Shelf (UKCS) and to make the UK market more competitive.
The policy team consulted with operator members to find out what measures they wanted the UK Government to implement at the 2016 Budget to encourage their continued activity in the UKCS.
All agreed that there needed to be a further cut in the headline corporate tax rate.
While there was discussion about how much that cut should be, the Chamber considered that the most realistic reduction would be of about 10%, with further reductions if the low oil price persisted and to reflect the mature nature of the UKCS.
So the Chamber wrote to the Chancellor, requesting a cut of at least 10 percentage points in the headline corporate tax rate and a zero-rating of PRT.
We also asked that he consider in the long term a permanent reduction in the headline corporate tax rate to 20 percentage points.
We highlighted that the UK Government had made a commitment to delivering a better fiscal strategy for the North Sea and the tax cuts would be an important part of making the UKCS more attractive for investment.
On Budget day earlier this month, the team welcomed the announcement from the Chancellor that there would be a 10 percentage point cut in the headline corporate tax rate through a cut in the Supplementary Charge and a zero-rating of PRT.
It was clear that the Chancellor had listened to our members and made the first changes to the fiscal conditions to build confidence in a world class industry.
Of course, there is still a lot more to do to make the UKCS as competitive as it can be.
Over the coming months the Chamber will continue to engage with operators and the wider industry about how the government can encourage more investment and exploration.
This is a first step on a journey.