Exxon Corporation - Page 11




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          Ring Fence Tax and PRT                                                      
               As indicated, during the Arab oil embargo world crude oil              
          prices increased approximately 5-fold.  As a result, in 1975, out           
          of concern that the U.K. corporation income tax might fail                  
          effectively to tax anticipated extraordinary profits to be                  
          realized by oil and gas companies, the U.K. Government enacted a            
          new tax regime on income earned from oil and gas recovery                   
          activities in the North Sea.  The new tax regime consisted of the           
          ring fence provisions of the U.K. corporation income tax (Ring              
          Fence Tax) and PRT.  The Ring Fence Tax and PRT replaced the U.K.           
          corporation income tax as it otherwise would have applied to                
          activities of oil and gas companies in the North Sea.                       
               The purpose and objective of the United Kingdom in enacting            
          the Ring Fence Tax and PRT were to accelerate tax revenues                  
          relating to development of North Sea petroleum resources and to             
          tax extraordinary profits of oil and gas companies relating to              
          the North Sea.                                                              
               To make it more difficult for oil and gas companies to                 
          offset profits derived from the North Sea with losses and                   
          expenses from unrelated activities, the Ring Fence Tax was                  
          enacted as a modified or customized version of the U.K.                     
          corporation income tax and was made applicable to activity of oil           
          and gas companies in the North Sea in lieu of the general                   








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