The “giveaway” of the country’s oil and gas resources should be ended by placing a tax of up to 80% on petroleum discovered off Irish shores.
A cross-party committee of TDs and senators has also recommended more consultation with communities affected by exploration works.
A licensing regime in place since 1992 means companies that discover and produce gas and oil in Irish waters are subject to a profit resource rent tax of 25% on top of corporate tax.
Campaign groups, including Shell to Sea, estimate that this has amounted to a “giveaway” of €420bn worth of resources.
But Communications Minister Pat Rabbitte argues that Ireland risks discouraging potential investment if the taxes are set too high.
The Oireachtas Committee on Communications, Natural Resources and Agriculture said now was an “opportune time” to examine the issue given “further possibilities for a viable oil discovery off the south coast”.
It has published a report, Offshore Oil and Gas Exploration, which says the potential of further oil discoveries is “unproven” but recent discoveries off Cork were likely to attract further international interest.
The report recommends increasing the tax to a minimum of 40% for small commercial discoveries, rising to 60% for medium discoveries and up to 80% for large-scale discoveries.
It says this would allow the state to maximise tax revenues “without deterring petroleum investment.” The proposal was based on what happens in Norway, where oil companies pay 50% tax on top of a 28% corporation tax.
The Irish Offshore Operators’ Association said the industry here was not comparable to Norway “which has an established industry, a high rate of commercial discoveries and which refunds 78% of the cost of unsuccessful exploration.”
It said: “The rationale for taxing a fledging and undeveloped industry in Ireland at the same rate as a mature and developed industry in Norway is totally unclear.”
The report also recommends a “statutory commitment” that local communities be compensated financially from any explorations, through infrastructure and social development.
Committee chairman Andrew Doyle (Fine Gael) said the review was undertaken to ensure lessons could be learned from the issues surrounding the Corrib gas pipeline in Mayo. But PJ Moran of Pobal Chill Chomain, which represents a one community affected by the pipeline, said the report did nothing to help them.
The committee said it could not make retrospective changes to licensing arrangements because this would cause “long-term reputational damage”.
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