BP, Shell and Tullow tax avoidance
UK giants reducing tax bills
A new report from campaign group Platform has revealed the scale of tax avoidance by the UK's three biggest oil companies.
According to their research Shell, BP and Tullow all use similar tactics to avoid paying the correct rate of corporation tax.
The report states that:
While we have see the global profits of UK oil companies increase greatly in the last decade, the amount of corporation tax they pay in the UK seems to rise only marginally, or in some cases, even falls.
Oil companies can avoid paying tax by minimising the amount of profit that passes through the company’s UK books, routing it through an international network of subsidiaries instead.
BP and Shell are particularly committed to tax havens, with more tax-dodging subsidiaries than their competitors: 605 and 523 high-secrecy subsidiaries respectively. IOCs can also play off governments against each other, exploit international legal mechanisms (Tullow in Uganda), and local loopholes (BP in Turkey) to avoid paying tax.
BP increased its pre-tax profits by several billion from $13.1bn in 2001 to $39.8 bn in 2011 – despite clocking up significant losses due to the Deepwater Horizon disaster. Despite the threefold increase in global profits before taxation, its corporation tax payments in the same period grew only marginally – from £707 million to £730 million.
If BP’s corporation tax payments increased in line with its global profits, it would have resulted in a payment of £2.1 billion in corporation tax to HMRC in 2011 instead of £730 million.
Shell managed to actually reduce its tax payments over the last five years – down from £958 million in 2006 to £783 million in 2011. This despite boosting its global pre-tax profits from $44.6 billion in 2006 to $55.6 billion in 2011. So while global profits increased by 25%, Shell cut its payments to HMRC by 18%.
In 2005 Shell “moved” the intellectual property ownership of its own brands to a subsidiary in Switzerland. Shell UK and its other British-based companies now pays royalties to Shell’s Swiss subsidiary for use of its logos, branding and trademarks.
By using tricks like this, Shell can reduce the profits that it books in London, thus claiming that the tax it pays is “broadly in line with the proportion of group profits made in the UK”.
From 2011 to 2012, Tullow increased its pre-tax profits from $1.07 billion to $1.1 billion, but in the same period the rate of corporate tax that it claimed was due dropped from $37.4 million to $10.1 million, raising questions as to how an increase in profit can result in such a dramatic decrease in corporation tax.
The report also outlined certain tax breaks afforded to them by the British government and the extra services they receive at great cost to the tax payer.
- Tax breaks for North Sea oil and gas and (potentially) shale gas.
- External political and military support.
Read the full report from Platform here
Find out more about Ethical Consumer's tax justice campaign.
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