We like Allister around here, really we do, but we fear that he's fallen into a slight error here in his list of taxes that should be abolished:
Third and fourth, the supplementary charge on the profits of oil and gas firms working in the North Sea, and the petroleum revenue tax, which hits older fields. Adam Memon of the Centre for Policy Studies is right to be calling for the immediate abolition of both taxes. The official statistics are grim: in 1998, Britain’s oil and gas output reached 230m tonnes of oil equivalent; in 2014, this was just 76m. One consequence of this catastrophic shrinkage is that the Scottish National party’s stated plan to rely on North Sea revenues to keep the welfare state going in an independent Scotland are deluded – but it also means that the Government must stop using the tax system to discourage what is left of this industry. Offshore corporation tax receipts have collapsed from £9.8bn in 2008/09 to £2.1bn in 2014/15, the Centre for Policy Studies reminds us, and is set to fall further to £600m and below shortly. Many fields still face horrendously high marginal tax rates, yet yield less and less for the Treasury. The supplementary charge and the petroleum revenue tax should both be axed. This wouldn’t be enough to turn back the clock but it would help engineer at least a minor renaissance for the sector. As a result, it is possible that the industry would, on balance, yield more cash for George Osborne.
Even The Guardian once managed to note that there really is a Laffer Effect on oil taxation. Noting that Gordon Brown has managed to raise tax levels so high that production, and thus revenues, declined. But that's an issue about tax rates, not about the existence of a tax. And the truth is that these are resource rents and those really should be taxed until the pips squeak.
The point being that such natural resources simply exist. No one created them and thus there's not really any reason why anyone in particular should profit from their existence. And we do need some tax revenue because we do need to have some government (no, we are not anarcho-capitalists). That people should profit from their capital, ingenuity and work in extracting and refining is just fine: but not that a private company should profit simply from the existence of such natural resources. That value, that resource rent, should be taxed away.
That is, we can have productive arguments about whether the tax rates are currently too high, but we shouldn't then fall into the error of arguing that such taxes should be done away with. The price of oil is set by the market in general: thus all such resource rent taxation does is change who profits from that happenstance of the creation of a natural resource, private company shareholders or all of us from lower taxation upon our incomes or consumption.
Change the oil taxation system by all means but don't end up not taxing resource rents.