I move amendment No. 76:
In page 108, subsection (3), line 35, to delete "relevant".
The purpose of the amendment will be very clear to the Minister but may not be clear to everybody who would not have followed it so closely. Essentially section 78 allows 100 per cent relief for development expenditure in relation to capital allowances and changes. It is a very significant improvement on the 1985 Bill which was at 40 per cent. It is giving very generous relief and I would like to acknowledge that. It is a very substantial improvement. However, I am arguing that subsection (3) of this section should be amended to delete in the second last line "relevant" and to leave that reading:
"Assets representing development expenditure shall not be treated, for the purposes of subsection (1) of Section 241 of the Income Tax Act, 1967, as being in use for the purposes of a petroleum trade at the end of any chargable period or its basis prior which ends before the commencement of production of petroleum in commercial quantities from the field. . ."
I hope that this is technically achieving what I am trying to do. It was the best indication I could get of how to achieve an objective which was to allow the cost of the development of a second field to be set off against the profits from a first field. This gives us an opportunity to repeat our analysis of the particular difficulties of the Irish oil and gas exploration industry. The Minister for Finance and the Minister for Energy have admitted this. We have all faced up to it. The reality of the limited level of activity indicates the difficulty very clearly. We have all accepted that we need a regime which is not just equal to those of our partners, but which will balance our particular geological difficulties, our problems of scale and the history of the relatively poor return for drilling in our waters to date. Because of all of those factors we need a regime that is not just comparable to, but is even better than that of our competitors, who have a much more favourable operation and marketplace in which to work. Therefore, it seems rather strange to me, that having conceded an enormous amount and having put together a very generous package, the Minister did not concede the two or three remaining requests for concessions which could help in development and that they are not included in the total. I can see why interest payments were resisted. I understand efforts were made to have these included under setup procedures, in the Bill. But I do not understand why this particular request by the industry was refused, because, together with the particular problems here, there are general problems in the industry, exploration is a very costly and very protracted activity. Sums expended on development may not be recovered until production has commenced. That is fair enough in the first field if somebody is that committed. The Minister questioned the reservations he had about this. He was concerned that perhaps people might begin development for its own sake. The Minister for Energy has outlined the incredible costs involved in exploration or development. It would cost anything from £3 million for an easy well to over £10 million for an expensive one. Is it realistic to suggest that companies would engage in this purely to cancel out a tax liability? If that is a problem, why does this concession exist in the major neighbouring regimes and why has it not proved to be a very serious problem in the British and Norwegian taxation systems?
I would like to impress very strongly upon the Minister that, if we are doing the job, we might as well complete it. We might as well ensure that we actually greatly improve our regime. Perhaps the Minister might expand a little on his reply in which he said that we are giving 100 per cent concessions which are not available elsewhere and that this, to an extent, balances out the failure to grant this particular concession which is available generally. Perhaps the could convince me if he indicated how much more generous the write-offs we are offering are than those offered by the British or the Norwegian tax regime. In relation to this particular concession I want to ensure that the concessions are not limited to each field separately. As I mentioned earlier, once the concession on the second field becomes operable, it can then be applied to profits on the first field, in any event. This lacks logic and it compares most unfavourably with the UK. For corporation tax purposes, once a company has commenced trading, by reference to a first field, in the writing off of the cost of developing second and subsequent fields begins in the year in which the costs are incurred, not in the year in which production occurs. This also has implications in terms of further exploration. Many of our finds are marginal, as the Minister indicated. To date, the indications are that many of them would be in the small to middle region. If this is the pattern for the future, this extra incentive could be crucial to a company even considering development. This package of measures is designed to encourage more oil and gas exploration and hopefully more finds. I cannot see why the Minister would hold off giving this further concession, which the industry itself deems to be valuable.
