Despite having made a record $30 billion in global profits so far in 2022, oil giant Shell has not paid windfall taxes in the UK and stated that it does not plan to this year, according to The Guardian. According to Bloomberg Tax, companies are permitted to lower their tax payments if they invest in production. Shell wasn’t responsible because it invested its third-quarter profits into oil exploration in the North Sea.
But at a time when many Brits are having trouble paying their energy bills, the government has come under pressure to alter the tax charge that was intended to raise billions of pounds to help with the cost of living crisis.
Frances O’Grady, general secretary of the Trade Union Congress, called Shell’s earnings outrageous, particularly at a time when millions are struggling to pay skyrocketing prices. The government is out of justifications. It must levy an increased windfall tax on the oil and gas industry. Families are being treated like cash registers by companies like Shell, according to BBC News.
Rishi Sunak, who is now the next prime minister of the UK, was the former chancellor and the one who first proposed the energy profits tax in May.
According to The Guardian, Sunak had to concede under political pressure that energy companies were making extraordinary profits—not as a result of recent changes in risk-taking, innovation, or efficiency, but rather as a result of soaring global commodity prices, which were influenced in part by Russia’s conflict in Ukraine.
However, substantial tax breaks were provided for investment in North Sea oil drilling, amounting to around $1.05 for every $1.16 invested. Additionally, the taxes didn’t apply to extremely lucrative industries like refining as well as the trading of oil and gas exports.
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Sinead Gorman, chief financial officer at Shell, stated that the business doesn’t expect to pay any taxes on energy income in 2022.
According to Gorman, who was quoted by The Guardian, “We are simply investing more heavily than we have, so we don’t have earnings that we can be taxed against.”
The UK government expected the windfall tax to bring in about $5.8 billion, but several experts cautioned that the revenue could be substantially lower due to tax loopholes.
According to The Guardian, the shadow secretary for climate change and net zero Ed Miliband stated that the fact that Shell recorded the second highest quarterly profits in the company’s history is additional evidence that a proper windfall tax is necessary to ensure that the energy companies pay their fair share.
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Rising energy costs as a result of Russia’s invasion of Ukraine resulted in profits for Shell in the third quarter of this year that was about $9.5 billion, more than double what the business earned at the same time last year. The period from April to June of this year showed a record $11.5 billion profit for it as well.