NORTH Sea operators are facing demands to explain their links to tax havens as their contributions to Scotland’s public finances plunge.
The biggest single producer off Scotland, China’s state-owned CNOOC, runs its UK business through a company registered in the traditional fiscal
paradise of the British Virgin Islands.
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But several other oil and gas firms drilling in the North Sea have complex and opaque corporate structures which include sister companies or subsidiaries registered in low-tax “offshore” jurisdictions.
The industry’s umbrella group, now lobbying for tax breaks as oil prices continue to stagnate, insists all North Sea profits are ringfenced and all UK taxes are paid. Last week it emerged that Scotland’s share of oil tax income had fallen 97 per cent to just £60 million.
However, a report from the International Transport Workers’ Federation (ITF) has now questioned the industry’s use of multiple tax haven firms.
It accused one firm working in the Scottish sector, US-based Chevron, of “aggressive tax minimisation” and claimed the giant had $32 billion in offshore accounts and hundreds of offshore subsidiaries. The company’s UK arm, which paid £168m in tax in 2014, the most recent year for which accounts are available, described the ITF claims as “incorrect”.
But Pat Rafferty, Scottish organiser of Unite, the biggest union in the North Sea and an ITF member, urged independent action to check the books of operators.
Citing the ITF report, he said: “The UK Government needs to investigate and step up action to clamp down on any inappropriate tax loopholes being exploited by Chevron to make sure UK taxpayers aren’t taken for a ride and it pays its fair share.”
Mr Rafferty was echoed by Patrick Harvie MSP of the Scottish Greens. He said: “The public purse has been subsidising big oil company profits for years, and successive Labour, Tory and LibDem Westminster governments have been only too happy to give the industry ever-deeper tax breaks, which the SNP also support. It’s hardly surprising that these multinationals respond by operating convoluted systems to reduce their contributions. I think people in this country are sick of hearing the meaningless claim that the use of tax havens and other devices complies with the law; the legal nature of tax avoidance is a central part of this scandal.
“We must challenge the industry over transparency, and look to increase revenue rather than subsidising exploration for new fossil fuel reserves which in reality can never be used.
“Both the UK and Scottish Governments must make clear that firms operating in the North Sea have a duty to fund the public services and infrastructure that their workers rely on.”
Deirdre Michie, chief executive, Oil & Gas UK, the industry body for North Sea producers, said: “It is important to note that all profits from oil and gas production activity in the UK are protected by a ‘ringfence’ which stops these from being diverted overseas.
“This guarantees all oil and gas companies operating in the UK pay the full tax due to HMRC and ensures losses from a company’s other activities (including from overseas operations) are not used to reduce a company’s UK production tax bill.”
Chevron’s UK operation is ultimately owned by two of the multi-national’s subsidiaries, one, with no employees, in the low-tax US state of Delaware and the other a business with just 12 workers in the Netherlands. ITF said it had identified numerous related party loans between Chevron subsidiaries and sister companies in arrangements it said “should ring alarm bells about aggressive tax minimisation”.
The company responded to the ITF report by saying: “Chevron North Sea Ltd fully complies with all tax laws relating to its North Sea UK interests and the allegations made by the International Transport Workers’ Federation are incorrect.”