- 8 -
the discretionary licensing system be changed to an auction
system or that the 12�-percent royalty rate associated with North
Sea licenses be increased.
In the 1973 report, PAC also reviewed the then existing U.K.
corporation tax applicable to oil company profits to be earned
from North Sea oil and gas and expressed concern that the U.K.
corporation tax was poorly structured in that petroleum companies
could offset profits from North Sea oil and gas activity by
losses from unrelated activities. PAC also recommended
legislative changes to the U.K. corporation tax to increase the
effective U.K. tax rate on profits relating to North Sea oil and
gas production. In that report, no recommendation was made to
impose a tax similar to the PRT.
In October of 1973, war broke out in the Middle East,
leading to the embargo by the Organisation of Petroleum Exporting
Countries (OPEC) on exports of crude oil to the United States
and, by the end of 1974, to a 5-fold increase in world crude oil
prices.
During 1974, the U.K. economy was experiencing a serious
recession with high inflation and severe balance of payment
problems. Because of the United Kingdom’s dependence on imported
crude oil, the 1974 increase in the price of crude oil
exacerbated the United Kingdom’s fiscal crisis. As a result, in
July of 1974, the U.K. Secretary of State to Energy issued a
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011