Figures released in Royal Dutch Shell's annual report have revealed that the oil giant paid no corporation tax in the UK last year, though it did pay several billions of dollars to other nations across the world.
Royal Dutch Shell
Photo: Mike Mozart / Flickr
The annual report showed that the Anglo-Dutch company paid a total of $7.8 billion in corporate income tax as well as royalties of $5.9 billion on pre-tax profits of $25.5 billion in 2019.
However, the UK government returned the money to the company, as did France, Indonesia, and South Africa.
For the second time ever, the figures contained in the annual report were broken down globally, from country to country.
The UK government gave Shell a rebate of $116 million, a similar return the company received in 2018. The rebate was attributed to tax losses connected with North Sea investments as well as rebates linked to decommissioning of ageing oil platforms.
Tax relief is often claimed by oil companies as a means of offsetting expenses such as equipment removal, and the plugging and abandoning of wells. The companies can deduct these costs from their profits, or claim back duties that have already been paid.
At the same time as handing out tax credits to oil companies, since implementing changes to the tax code in 2016, the UK government is also charging them lower tax rates on their profits.
The change in the tax code was implemented by former chancellor George Osborne, who argued at the time that it was necessary to increase investment into the UK continental shelf while oil prices were dropping rapidly.
As the industry began to restabilise, with oil prices rising back once more over the $60 a barrel mark, production increased and costs stayed low, the UK has not reaped the benefits in a way that other major oil-producing nations have.
Shell paid the largest amount of money last year, $2.9 billion, to Oman, followed by over $1 billion to Norway, and $851 million to Nigeria.
Whilst the coronavirus has hit many sectors hard, especially oil, it has also led to increased scrutiny of its tax contributions to the UK economy, as the chancellor Rishi Sunak searches for a way to fill the hole in the treasury created by the pandemic.
Shell's CFO Jessica Uhl made a surprising public acknowledgement yesterday that “in times of crisis such as the Covid-19 pandemic, taxes are also central to government policies to support people’s lives and livelihoods”.
As reserves begin to dry up, the dismantling of oil platforms, gas rigs and other related infrastructure in the UK North Sea could cost British taxpayers as much as $24 billion, according to forecasts by the parliamentary watchdog last year.
Shell's UK workforce totals over 6,400 people in the UK, and its revenues in 2019 were $92 billion. By comparison, revenues in Oman were $8.4 billion, and in Norway were $2.4 billion.
Shell said that it had paid corporate income tax in 99 countries, making its effective tax rate 35.5%.
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