A consultation into North Sea taxes has been welcomed by the oil and gas industry, which says bold measures are required to tackle declining production.

Companies in the sector are being asked for their views as part of a 12-week review announced by the Chancellor at his last Budget.

The UK Government said it will “explore how the tax regime can continue to encourage investment in the North Sea and help maximise the value of the country’s oil and gas resources for the UK, whilst ensuring the nation continues to receive a fair share of profits”.

It comes as the industry continues to be a key battlefield in the Scottish independence referendum and both sides continue to argue over future tax income forecasts.

First Minister Alex Salmond said the oil and gas industry has been “neglected and undermined” by successive UK governments.

But Danny Alexander, the chief secretary to the Treasury, accused Mr Salmond of “promising milk and honey” based on oil projections.

Launching its review, the UK Government said tax generated from the industry will “continue to decline over the long-term” and that the value comes through wider economic benefits such as jobs, skills and exports.

It believes it is best placed to “maximise” the benefits because it can “provide the stability and predictability needed for companies to invest and is able to adopt a long-term approach to the sector because of its broad shoulders”.

Mr Alexander said: “This review offers the opportunity to put the fiscal regime on the best footing to ensure that the economic potential of the North Sea can be maximised for the UK and Scotland.

“The broad and diverse UK tax base means we are able to support the industry through, for example, certainty over decommissioning tax relief.

“A separate Scotland is unlikely to be able to provide the same level of support and risks missing out on the economic potential the North Sea has to offer.”

Oil and gas companies operating in the North Sea are taxed at higher rates than other companies to ensure the UK gets a share of the profits of production.

Marginal tax rates are 62% or 81% compared to the standard corporation tax rate which is currently 21%, according to the Treasury figures.

Westminster has introduced tax reliefs or “field allowances” to encourage investment in North Sea fields, particularly those that are smaller or harder to access.

Decommissioning relief deeds have also been signed to provide certainty over the tax relief available for decommissioning North Sea infrastructure when production ends.

The Government estimates that there remains between 11 and 21 billion barrel of oil equivalent (BOE) in the UK continental shelf (UKCS) that could be economically viable to recover.

Industry body Oil & Gas UK welcomed the consultation, saying the sector faces an uncertain future and the tax review is urgently needed.

It said there are “worrying signs” that investment will halve over the next four years, while exploration remains at an “all-time low”.

The body’s economics director Mike Tholen said: “The current fiscal regime has become increasingly complicated and unpredictable with high tax rates combined with a multiplicity of allowances.

“While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate. Investors are increasingly looking to invest elsewhere rather than in the UK.”

Chief executive Malcolm Webb said: “While our members will work closely with HM Treasury to respond in depth to the consultation, this review must lead to early action. It cannot simply be a paper exercise. The tax regime must be simplified and the headline rates reduced to send a strong signal that the UKCS is open for business.”

The First Minister said that in an independent Scotland “our oil and gas industry will be properly supported, and not neglected and undermined as it has been by successive Westminster governments”.

In a letter to Mr Alexander today he wrote: “Oil and Gas UK calculated at the time of your 2011 tax raid that it was one of 16 different tax changes in the previous decade. By contrast, fiscal and regulatory stability will be at the heart of an independent Scotland’s approach to the North Sea oil and gas industry.”

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