Aberdeen & Grampian Chamber of Commerce is calling on the Chancellor to make further tax cuts in his upcoming Budget to lengthen the lifespan of the North Sea oil industry.
In a letter to George Osborne, the Chamber urges the Treasury to take definitive action on Wednesday to anchor the sector’s talent in the UK Continental Shelf (UKCS) and follow through on previous promises.
It proposes a permanent reduction in the headline rate of tax, achieved by reducing the “supplementary charge” and “Petroleum Revenue Tax” immediately by a minimum of 10 percentage points.
The organisation argues there is a need to reflect the maturity of the North Sea basin in setting tax rates.
It also points to the severe impact that low oil prices is having across all sectors of the North-east economy, with a 15 per cent decrease in hotel occupancy rates and housing sales down by 14 per cent in the previous 12 months.
James Bream, research & policy director at the Chamber, said: “Fiscal competitiveness is a key factor in the success of the oil and gas industry, which is why we are asking for a cut in the headline corporate tax rate in order to reflect the maturity of the UKCS.
“We are a frontier basin, we believe we have the world’s best supply chain and the Government must ensure we have the world’s most competitive tax regime.
“Change may not have an immediate impact but will be a signal of support and demonstrate an effort to increase investor confidence.
“The alternative is to do nothing which will have an equal and opposite impact on that confidence.”
Ahead of the Chancellor’s Spring Budget on March 16, the British Chambers of Commerce (BCC) is urging the government to avoid introducing new taxes, costs and obligations that could dent business confidence in a softening economic environment.
The business group urges the Chancellor to use his fourth fiscal event in 12 months to opt for a steady approach that gives businesses, individuals, and government itself the time needed to work through existing commitments and reforms. BCC seeks three commitments from the Chancellor at the Budget:
- No new taxes on businesses or entrepreneurs for the remainder of this parliament. Pensions auto-enrolment, the National Living Wage, the apprenticeship levy, higher dividend taxes and other measures have significantly increased up-front burdens for business;
- Deliver the long-overdue business rates reform by April 2017, and focus on resetting the valuation, collection, and setting of the rates, as opposed to changing who gets to keep and spend the revenue;
- Address shortcomings at HMRC to support, not undermine, business growth. BCC wants HMRC focused on supporting businesses, particularly SMEs, and making compliance easier - rather than heavy - handed enforcement campaigns.
Dr Adam Marshall, BCC acting director general, said:
"In an increasingly uncertain economic environment, the Chancellor should avoid any and all moves that could damage business confidence. At a time when many businesses already face sharply higher costs and taxes, the Chancellor must avoid adding any new obligations on our firms.
“Ministers must also finally take action to ease the burden of business rates. Reform of the rates system is long overdue, and a source of uncertainty for companies everywhere."