Daily Telegraph (UK): Proud of Shell: “Shell has had its problems, including a scandal over its reserves. But we should be proud of its profits.” (ShellNews.net) Posted 5 Feb 05

(Filed: 04/02/2005)

For those who enjoy Kremlinology, reading the signs emitted by the notoriously inscrutable oil giant Shell has always been fascinating. But even by Shell's standards yesterday was vintage, because New Labour's apparatchiks chose to interfere and spread some disinformation of their own.   

Martin O'Neill, chairman of the trade and industry select committee and an ally of the Chancellor, said that Shell should be subject to a windfall tax to help the poor pay their heating bills, after the company's annual profits rose by a third to £9.3 billion.

Perhaps Mr O'Neill has been reading Pravda, because making extraordinary tax demands on oil companies is all the rage in Russia, where President Putin has in effect forced Yukos into bankruptcy by accusing the company of not paying enough tax.

What is more, from Labour's selfish perspective, a windfall tax on unpopular oil companies is politically a good idea. There will probably be an election in May. The most damaging charge that Labour faces is that there is a black hole in public finances and that it will have to put up taxes.

But a windfall tax makes no economic sense. A certain and stable tax system is a necessary precondition to doing business here and, if companies were vulnerable to punitive levies every time they made big profits, the climate for investment would deteriorate drastically. In fact, that is what has happened in Russia, where the stock market lost about a third of its value during the Yukos saga, as foreign investors decided the political risks were too high.

Shell has had its problems, including a scandal over its reserves. But we should be proud of its profits. The company is actually half-Dutch, but, thanks to its profits, it already pays a huge amount of tax to the Exchequer.

In addition to corporation tax, Shell's shareholders - who are mostly pension funds investing on behalf of ordinary people - will pay at least 20 per cent tax on the £5.3 billion of dividends this year. Pension funds will also benefit from a separate plan to return about £2 billion to shareholders. Then there is the income tax paid by its employees here, and the duty on petrol, which in this country is among the highest in the world.

Soon after Mr O'Neill's suggestion, a Treasury minister, John Healey, reassured the Commons that there were "no plans" for a windfall tax on oil companies. Still, a politically useful idea has been planted in the public mind. Is that too cynical? You never know, where the Kremlin is concerned. 

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2005/02/04/dl0402.xml