Shell reveals it paid no UK corporate income tax in 2018 Oil group benefited from rebates on $731m profits thanks to North Sea decommissioning
Government report reveals CNOOC as North Sea’s largest taxpayer, Shell sits lowest
Royal Dutch Shell paid no corporate income tax in the UK in 2018 despite the oil and gas group generating pre-tax profits of nearly $731m, after receiving tax refunds related to the decommissioning of North Sea oil platforms. The figures, published in a report by the Anglo-Dutch company showing a global breakdown of payments, come after it said it would voluntarily disclose how much tax it pays in each country as part of a broader transparency drive.
Meanwhile, a government report has revealed CNOOC was the biggest tax spender in the North Sea last year while energy giant Shell paid the least on balance after a reimbursement.
The “extractive industries transparency initiative” (Eiti) report highlights progress in getting UK-based oil, gas and mining companies to disclose their payments and receipts to and from government agencies.
Dismantling oil and gas rigs and other infrastructure in the UK North Sea as reserves begin to run dry could cost British taxpayers £24bn, parliament’s spending watchdog warned this year. Stuart McWilliam, campaign manager at Global Witness, said: “The fact that Shell and other major oil companies are regularly getting huge tax rebates, despite making vast profits, is a feature that is now baked into the UK oil and gas tax system.” To help offset the expenses of plugging and abandoning wells and removing equipment, energy companies are able to claim tax relief, deducting costs from their profits or claiming back duties they had previously paid.
Shell is committed to compliance. Specifically, we seek to comply with the applicable tax laws in all the countries and locations in which we have a taxable presence Jessica Uhl, Shell CFO After 40 years, Shell is in the process of decommissioning the Brent oilfield — one of the UK’s biggest east of the Shetland islands — and its four large production structures, which together underpin the global crude benchmark. While the group generated pre-tax profits in the UK of about $731m on total revenues of $108bn, it received a series of tax refunds totalling nearly $115m. It said more than 40 per cent of the UK pre-tax profits were attributable to overseas joint ventures where taxes were paid in another jurisdiction. “Shell is committed to compliance.
Specifically, we seek to comply with the applicable tax laws in all the countries and locations in which we have a taxable presence,” said Jessica Uhl, Shell’s chief financial officer. Shell said it paid $10.1bn in corporate income tax globally in 2018 on pre-tax profits of $35.6bn. It also paid out $5.8bn in royalties around the world.
Shell’s tax arrangements have been under scrutiny in the Netherlands in recent years after the company relocated its headquarters from London to The Hague, with critics accusing the company of dodging taxes via offshore trusts. Shell confirmed in its new report that it did not pay Dutch corporate taxes apart from at its gas joint venture with ExxonMobil. Brussels is also examining Shell’s tax arrangements in the Netherlands, raising questions over whether it has received any special treatment from the Dutch government in what might constitute illegal state aid, according to two people with knowledge of the probe.
Regulators are examining if Shell benefited from tax breaks when paying dividends to UK shareholders after concerns the company might be in breach of EU state aid rules. Brussels interest in Shell was first reported by MLex. The European Commission has stressed it had not opened a formal investigation. A spokesperson for Shell in the Netherlands said: “We understand that the European Commission is looking into our ruling in the Netherlands. We are not involved in the process.” The EU is already pursuing formal investigations into the Dutch tax affairs of Nike and Ikea.
This year, EU judges struck down a commission order for Starbucks to pay €30m in back taxes to the Netherlands, in what some regarded as a blow to state-aid enforcer Margrethe Vestager. Is this the last of the big North Sea oilfields?