Everything you need to know about windfall taxes as PM rejects calls for levy on oil giants

Keir Starmer has urged the government to introduce a one-off levy on oil and gas giants as rising energy bills boost profits. However, Boris Johnson has dismissed Labor’s calls

Boris Johnson has once again rejected calls for a windfall tax on energy companies’ rising profits, despite Britain’s skyrocketing bills.

Labour’s Keir Starmer has urged the government to introduce a one-off levy on oil and gas giants as rising energy bills boost profits.

There are also rumors that there is a disagreement over the idea between Boris Johnson and Rishi Sunak, after the Chancellor hinted in an interview that the government could reverse in the coming months.

On Monday, No10 denied there had been a cabinet split but said “every company has to justify its approach” after being challenged over BP’s share buyback programme.

What is a windfall tax?

Usually a one-off levy imposed on a company or group of companies that has unexpectedly benefited from something beyond their control, in this case a rise in oil and gas prices.

How could it work?

Labour’s proposal would see a year-long 10 percentage point increase in corporate income tax for oil and gas producers, which the party says would raise £1.2 billion. The money raised would be used to offset an increase in household energy bills.

Do others support a windfall tax?

The Libs Dems and the Green Party are among others doing this.

What speaks against it?

The North Sea oil and gas industry is already arguing that it is already heavily taxed. Producers pay 30% corporate tax on their profits and an additional 10% tax rate on top.

But they also enjoy capital allowances that allow them to offset investments against their tax bill.

Companies also claim that a windfall tax would discourage investment in cleaner, greener technologies.