Oh, Mark, Please!

Good Grief!

I think we should go further, instead of taxing profits only when they become excessive, we should recognise that oil reserves are a gift of nature. The distribution of the wealth derived from their exploitation should reflect this and be spread among all citizens, not disproportionately in favour a minority of the already wealthy. A large proportion of Shell\’s profits arise because oil companies are allowed cheap and sometimes free access to oil reserves when they should be paying the rest of us for the privilege.

Can we try and drag ourselves into the 20 th century at least, if the 21 st is proving too difficult? Are you not aware that everyone already does this? Petroleum royalties? Special rates of corporation tax?

The UK appears to have charged the oil companies some £ 63 billion for precisely that, the gift of nature, distributing that wealth amongst all citizens. (That number may well be off as the tax regime ain\’t that simple, see here.)

It\’s one thing to insist upon higher taxation, quite another to insist that we immediately need to bring in a system which has already been extant since, ooh, say, the Petroleum (Production) Act of 1934.

 

8 comments on “Oh, Mark, Please!

  1. So Tim, you reckon the same level of taxes should be levied on profits derived from exclusive or privileged access to natural resources as on profits not so derived.

    Presumably then, we should celebrate the means by which Mr Abramovich amassed his fortune as perfectly legitimate. Once again, you ignore my main point, in order to appeal to your audience’s prejudices.

    Tim adds: Mark, please, try reading what is written. You call for higher taxation (actually, for taxation at all) of those profits made purely from the existence of natural resources. Those natural resources are, I think I’m right in attributing this to you, things that belong to the nation. Thus those who exploit those resources are entirely welcome to profit from their value added, but the value of the original resource should be taxed for the nation. Their value added is then taxed as any other corporate profit.

    Yes?

    All I’ve done is point out that this is the way the tax system works right now. You’re calling for what we already have.

  2. because oil companies are allowed cheap and sometimes free access to oil reserves

    He’s not heard of resource nationalism I take it.

    As for free access……where is it please do tell……I want some.

  3. It’s underground, serf; all you need to do is find it, dig it up, transport it, process it and market it. Dead simple, dead cheap and totally risk-free.

  4. Thanks Ian, I’m off to the shed for my shovel and I’ll start digging right after I finish this comment and a coffee.

    I’m from Alberta, Canada, and we have more gas’n’oil than most. Nutbars here convinced our government that our governments share should rise from 44% to 49% on conventional oil and 58% to 63% on natural gas. Guess what, drilling sagged by 31% immediately, and it’s going to be much worse next year. The governor of Montana immediately came up here and touted his state as the place for Alberta drillers to go, likewise the premier of Saskatchewan.

    But its all good as I am sure the government will spend the money much more wisely than those rat-bastard oil companies. You know, the ones you, and your kids education fund, and your pension plan, all hold shares in. So I say let your pension plan go bugger off and give the cash to bureaucrats to spend on supporting homeless one legged Inuit lesbians of colour, lest the children and other minorities suffer.

  5. BJS:

    Except in degree, it’s identical to the risk faced by entrepreneurs the world over–that authority will simply change whatever deal attracted their investment in the first place. In a very real sense, prospects (over the entire world) range merely from terrible, nearly sure-fire loss all the way to “not all that bad, considering there’s nothing better.”

    The general populatiion seems indifferent to such inroads, almost as though they were bystanding witnesses to an armed holdup who agreed not to interfere or inform in return for a bit of the proceeds.

  6. Collectively, the comments here restate the analysis offered by Nigel Lawson in the chapter dealing with North Sea oil in “The View From Number 11”.

    If I understand him correctly, then, roughly paraphrasing, he argues that “while in theory, there is no need for a special tax to capture the value of the economic rent as its value can be recovered by a competitive auction of exploration or production licences, the prospective risk to bidders that a future government would use the issue of economic rent as justification for a special tax regime depresses the prospective yield from auctions, so necessitating the imposition of such a tax in order to recover the full value of the economic rent”.

  7. Mr. Peakall, you do make a good point. Our governments are known to be so debased and so dishonest and so unwilling to honour an agreement that businessmen factor that into their analyses.

    Does anyone want to live in a society where I am unwilling to bid a fair price for anything because of fear of state breach of contract / intervention / usurpation? I say ‘anything ‘because the government controls everything, or is capable of doing so, at its unfettered whim.

    Not me.

    Sounds like the old USSR. Sounds like thirld world thuggery. Sounds like a recipe for poverty.

    Make a deal and stick to it. If it’s a good deal, be grateful. If it’s a bad deal, suck it up and do better next time. Elementary business ethics and our governments have lost all ethical moorings.

  8. A large proportion of Shell’s profits arise because oil companies are allowed cheap and sometimes free access to oil reserves when they should be paying the rest of us for the privilege.

    Hmm. I guess we’ll not consider Shell’s access to the Lunskoye and Piltun fields offshore Sakhalin to fall into this category. In fact, they seem to be some $10bn overspent.

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