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representative industry data indicate that oil companies received
uplift allowances alone of �12.4 billion as compared to North
Sea-related interest expense not allowed of �8.6 billion.
Evidence at trial covering approximately 88 percent of total
oil production in the North Sea and 98 percent of total PRT paid
by oil companies during 1975 through 1988 shows that special
allowances and reliefs under PRT significantly exceed the amount
of disallowed interest expense for Exxon and other oil companies.
These special allowances and reliefs reduce the base of PRT to a
subset of net income representing excess profits and establish
that, in its predominant character, PRT constitutes and is to be
treated as an income tax.
Although PRT does not allow a deduction for interest expense
-- certainly a significant expense -- under the special
provisions allowed (particularly uplift), the oil companies are
provided under PRT allowances that effectively compensate for the
nondeductibility of interest expense.
As explained by the Government official who on April 10,
1975, first presented for formal legislative consideration the
proposed Ring Fence Tax and PRT to the U.K. House of Lords, “In
fact, of course, this tax [PRT] represents an excess profits
tax.”
Respondent’s experts assert that uplift provides too “crude”
a substitution for a deduction for interest expense, that PRT
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