Ann Phelan
Question:199 Deputy Ann Phelan asked the Minister for Communications, Energy and Natural Resources if he will consider changing the old royalty-free tax regime applying to existing oil and gas exploration licences. [8520/11]
View answerTuesday, 19 April 2011
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Ireland competes with other countries, both in Europe and further afield, to attract mobile international exploration investment. To that end, it is important that Ireland maintains a licensing regime that appropriately reflects both the risks and rewards of investing in petroleum exploration in the Irish offshore, while ensuring the State receives a fair share of profits where a commercial discovery is made. It is also important that the actual choice of fiscal instruments used does not put Ireland at a relative disadvantage when seeking to attract mobile international exploration investment to Ireland.
Ireland's fiscal terms are tax based and do not include royalty payments. In 1987, Ireland followed the lead of other countries such as the UK and Norway in moving away from a royalty based payments system to a tax based system. Under a tax based system the return to the State is linked directly to the profitability of the individual oil or gas field, as compared to a royalty system where payments are linked to the actual volume of production and do not take account of differences in development cost or actual profitability.
I do not consider that Ireland should move from a tax based fiscal licensing regime to a royalty based regime. A comprehensive review of Ireland fiscal terms was carried out in 2007. This review, which was underpinned by independent economic analysis, considered the appropriateness of Ireland's licensing terms in comparison to other European countries that Ireland competes with for exploration investment. The outcome of that review was the introduction of a profit resource rent tax of up to 15% on top of the 25% corporation tax rate that already applies. The revised licensing terms apply to exploration licences issued since 1st January 2007.