DIRECTOR   Ludovicus Von Rumpoy


Oil industry opposition to the OTB concentrated not on its complexity but on its stringency. This concern resulted in various amendments being incorporated in the OTB at committee stage. However, mainstream economic theory would predict that oil companies would prefer a simple, more straightforward tax regime in order that plans and forecasts could be made with greater certainty. This would apply at the most senior level in oil companies where policy decisions are taken and where simplicity would be advantageous. Similarly, within the Civil Service some senior bureaucrats may favour a simple tax system, for example to reduce uncertainty in overall economic planning. If the theories of bureaucracy are applied to the oil companies (and to their lobby organisations such as The United Kingdom Offshore Operators Association, UKOOA, and The Association of British Independent Oil Exploration Companies, BRINDEX) it becomes apparent that bureaucrats within oil companies are likely to favour a complex tax system for reasons similar to those of government bureaucrats. A complex and unstable tax system is in the common interest of tax experts in the Civil Service and in oil companies. Such complex tax systems may be manipulated by these tax experts to their advantage; moreover, such a system is good for employment and status. Hence, suggestions for capturing rent by auctioning licences (see Chapter 4) or for a simplified tax system are not well received by bureaucrats in government or in oil companies. In addition, officers within industry pressure groups attempt to justify their own positions, the existence of their organisations and their status within the industry. A complex tax system which is perpetually in a state of flux facilitates the fulfilment of these ambitions. The Paymaster-General, Edmund Dell, maintained43 that PRT would be received and adjusted over time. Constant up-dates and reviews of policies are consistent with ambitions of tax experts in the government and also in industry, since the bureaucrat is able to maintain his position and expand his budget over time. The speed at which the amendments to the OTB were introduced illustrates the desire of politicians to capture as much political advantage as possible from the OTA whilst North Sea oil was still at the forefront of popular awareness. It also clearly shows the unwillingness of government bureaucrats to abandon a 'bad' policy and instead to modify and amend the policy; again this in line with Breton's44 bureaucratic behaviour characteristics (see Chapter 3). This is a recurring theme with regard to domestic oil taxation policy. Agreement between the two major parties on the need for a comprehensive offshore tax system was enforced by official statements designed to assure the industry that the Government and the Opposition were concerned with the long term. The tax was intended to be 'a stable tax and not used as a short-term regulator'.45 This sentiment was echoed by the Opposition spokesman, Patrick Jenkin: 'there is no intention here that this should be anything other than a stable tax, which will not be used for demand management purposes nor as a short-term regulator'.46 In the context of the economics of politics these statements can be seen to be designed to capture votes. Both parties are perceived to give priority to long-term stability and the Conservative Opposition is popularly seen to be placing the long-term interests of the oil sector above party-politics by supporting the tax system.