Despite reporting the second-highest quarterly profit in its history, Shell still needs to pay the UK windfall tax.
The energy company reported that between July and September, global profits were $9.5 billion, up from $4.2 billion same time last year.
Meanwhile, Shell claimed it had lost money because of substantial investments in the UK.
It anticipates beginning to pay windfall taxes early in the next year.
When Rishi Sunak was the chancellor in May, he introduced the Energy Price Levy. Also known as a windfall tax, on the earnings of energy companies. He predicted it would raise £5 billion in its first year at the time.
After the COVID lockdowns ended, oil and gas prices rose, but they have soared since Russia invaded Ukraine in February, generating enormous profits for energy firms.
The surge in energy costs for homes and businesses is also a result of higher oil and gas prices. Through the Energy Price Guarantee program, the government is reducing gas and electricity costs. However, instead of lasting two years as initially anticipated, the program will now conclude in April.
When funding is reduced, there have been concerns that typical home gas and electric expenses might exceed £4,300. This is because the price of electricity has also contributed significantly to inflation, which is at 10.1%.
Defective UK windfall tax
According to Ed Miliband, the shadow secretary for climate change for Labour, the current windfall tax on energy companies is defective. And “would see billions of pounds of taxpayer money go back into the coffers of oil and gas corporations through ridiculous tax exemptions.”
He claimed that Shell’s gains were “more evidence” that the UK required a more outstanding windfall tax to ensure that energy corporations “pay their fair part.”
Liberal Democrats, Green Party, and activists have criticized the present course of action.
Nadhim Zahawi, a cabinet minister, justified the windfall tax, claiming that Shell and other energy goliaths already pay substantial taxes.
A windfall tax is a one-time charge that targets businesses that profit from an event they were not at fault, such as a significant increase in oil prices.
Only UK profits—a small portion of operations for most oil and gas companies—are subject to the 25% tax.
Companies producing oil and gas in the North Sea are taxed differently than other companies. They first pay a 30% corporate tax and an additional 10% rate on profits. They then pay the windfall tax, bringing their overall tax rate to 65%.
However, by accounting for losses or spending money on things like decommissioning North Sea oil facilities, businesses have decreased the tax they pay. It implies that companies like BP and Shell have paid virtually no tax in the UK in recent years.
Another provision of the Energy Profits Levy enables energy corporations to apply for tax breaks worth 91p of every £1 invested in UK fossil fuel extraction.
According to Downing Street, any modifications to the windfall tax would be addressed in Chancellor Jeremy Hunt’s autumn statement.
Shell reported $400 million in investments in the UK during the third quarter.
Taxes on companies in the oil and gas sector are “inevitable” to aid the most vulnerable. However, he insisted that the energy markets could not act in a manner that harms a sizable portion of society.
However, Frances O’Grady, general secretary of the TUC union, argued that Shell’s earnings were scandalous. Particularly given that millions of people are struggling to pay skyrocketing prices.
Shell has recorded profits of $30 billion thus far this year, more than double its earnings from the first nine months of 2021. The business also intends to enhance its regular dividend by 15%. And is on course to surpass its previous record of $31 billion in yearly earnings set in 2008.