Britain raises the tax on the profits of oil and gas companies at the same time as the economic emergency in the country. Finance Minister Jeremy Hunt said the levy will rise from 25% to 35% from January 2024 to March 2028. These taxes will amount to an estimated £14 billion per year for the British Treasury.
Inflation in the UK has exceeded 10%, the economy is in a severe slowdown, even a recession. The increase in taxes for the energy companies along with other measures including the use of fiscal (budgetary) and monetary (interest) policies should improve the situation. Hunt told the House of Representatives that there is a close co-operation with the Central Bank with the aim of giving confidence in the UK’s ability to pay its debts.
The additional tax started as a proposal by the former finance minister, Rishi Sunak, who became the prime minister a few months ago. Sunak said at the time that the intention was to impose a targeted and temporary energy profit levy, to incentivize oil and gas companies to reinvest their profits. The levy was supposed to be 25% and the fear was that it was an additional levy that was beyond the current tax, although most estimates were for an increase in the current tax rate, and now, it turns out that this is indeed the case.
This tax is the result of the need to increase the coffers, especially at a time when the state is required to help millions of Britons who are struggling to cope with the skyrocketing energy prices. What could be simpler than taxing the companies in the field that actually increase profits in light of the war in Ukraine. The war causes an increase in the profits of the companies and a deterioration in the condition of the citizens and the role of the state is to balance this.
Will this affect Delek’s Ithaca?
As mentioned, according to what is known, this is a tax increase and not a new levy. This means that companies with accumulated losses have an advantage – they will not pay tax as long as the profits do not exceed the accumulated losses. Ithaca is apparently in this slot, the company has billions of tax losses, so it won’t affect it. This was expected, but today’s report reinforces this assessment. The final version of the legislation will have to be seen to understand the full implications for Ithaca, but the tax increase does not appear to affect it.
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