While the basic tax rate of 25% remains the same, the top-up rate applied to more profitable wells will vary from an additional 10% to 40%, but capped at a total of no more than 55%
Pat Rabbitte, the Minister for Communications, Energy and Natural Resources, said he would also introduce a new minimum payment tax rate of 5% every year for a well that is producing commercially.
The new system should, at least, give greater certainty to investors and provide a stable framework to exploit resources offshore. Yet, it does not fundamentally change a system that remains based purely on a tax on operator-declared profits, and highlights, once again, the necessity for a complete overhaul of the licensing system for exploration.
As economist Eddie Hobbs points out in the anthology of essays, Own Our Oil: The Fight for Irish Economic Freedom, the Norwegian model is preferable as it maximises the benefits of oil production and ensures citizens and not the oil companies are the main beneficiaries of any find. A system based on production sharing and that applies royalties to sales would provide far greater stability and certainty all round.
Before Ray Burke dismantled it, our tighter regime in the 1970s and ’80s saw a far higher level of exploration. When Ireland became a member of the EEC in 1973, we sold the family silver in the form of our fishing grounds. Oil and gas represent the family gold — far too precious to give away.