Ireland plans to increase the marginal tax rate on oil and gas production in its unproven waters to up to 55 percent from 40 percent, the country’s energy minister said on Wednesday.
Hopes that oil production could generate revenue for a debt-laden government, as well as a path towards energy independence, grew in 2012 after Irish explorer Providence Resources reported the first commercially viable oil-flow rate at its first drilling target, Barryroe.
But ill-fated past projects and the fact Ireland does not yet have a major commercial field prompted a relatively lenient approach towards tax on the industry, comprising a 25 percent corporation tax rate and a “resource rent tax” of between zero and 15 percent of profits.
Energy minister Pat Rabbitte said the government would adopt recommendations made in an independent review for the marginal tax take on a producing field, made up of both corporation and production tax, to be increased to a maximum of 55 percent for the most profitable fields under new licences.
“We have to attract outside investment and this fiscal regime is judged to be such that it ought not to deter outside investment and at the same time, if we do have a find, the state should get a larger return on that producing field,” Rabbitte told national broadcaster RTE.
Rabbitte launched the review last year after an Irish parliamentary committee recommended the rate for future licences be increased to a minimum of 40 percent and a Norway-style 80 percent for larger projects. He said the new regime would not be retrospectively applied to existing licences, but would be in place for a new licensing round for 2015 which his department is launching on Wednesday.
Providence won three of the 13 licences up for grabs in the last round in 2011, while Petrel Resources and Europa Oil & Gas were given two each. Fastnet Oil & Gas has also secured licences in Ireland.