Oil industry taxes come under scrutiny

Independent advisers are being sought by Government to assess if the right tax is being charged for the oil and gas industry.

A review of controversial reliefs for exploration companies will be included in the audit along with the level of other special fiscal arrangements for bigenergy firms.

Pat Rabbitte, Minister for Communications, Energy and NaturalResources, said he wants experts to review if the terms for exploration, development and production are fit for purpose.

“Ireland’s offshore, while holding great promise, is relatively under-explored with only four commercial gas finds to date,” he said.

“In setting our fiscal terms we need to strike the necessary balance between attracting the high-risk exploration investment needed to prove that promise, while maximising the return to the State and its citizens from our natural resources.”

Mr Rabbitte’s decision to seek advice follows a report from the OireachtasCommittee on Communications, Natural Resources and Agriculture in May last year, which called for licensing and tax terms for big energy companies to be hiked. It wanted to see overall tax jump from a basic rate of 40% on a sliding scale up to 80% for very large commercial discoveries.

The generous regime in play at present was put together by former Fianna Fáil minister Ray Burke who was jailed over tax fraud. They allow for a 25% tax rate on the profits energy giants make on offshore oil and gas discoveries in Ireland and the cost of exploration to be written off — one of the lowest rates in the world.

But waters off Ireland are proving lucrative, with Shell’s Corrib gas fieldnearing production and Providence Resources revealing last year that itsBarryroe field off Cork, contains up to 1.6 billion barrels of oil, and plans toprospect off Dalkey.

Department officials are seeking applications from tax advisers under atendering process.

Mr Rabbitte’s office said successful auditors will focus on what level offiscal gain is achievable for the state and its citizens and also on the appropriate mechanisms best suited to produce such gain.

It will look at petroleum prospectivity offshore and Ireland’s attractiveness for mobile international exploration investment.