If oil and gas prices fall, windfall tax will be reduced

Scotland-based offshore drilling platform

The government has announced that if oil prices return to normal levels for an extended period of time, the windfall tax on oil and gas companies will be reduced.

If that were to occur, the tax rate on businesses would decrease from 75% to 40%, it stated.

Targeting businesses that gain from something they were not responsible for is done with a windfall tax.

The government introduced it last year to aid in financing its plan to reduce energy costs for homes and businesses.

Profits for energy companies have increased recently, first as a result of increased demand after Covid restrictions were lifted and then as a result of higher energy prices brought on by Russia's invasion of Ukraine.

However, the cost of gas and oil has since declined from its peaks.

The windfall tax, according to a statement from the Treasury, will last until March 2028, but the rate will decrease if the average price of oil and gas falls to, or below, a predetermined level for two consecutive three-month periods.

Oil and gas prices have been set at $71.40 per barrel and £0.54 per therm, respectively.

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