Government hikes tax on oil/gas exploration firms
The Government has bowed to public pressure and now plans to hike taxes on exploration companies which find oil or gas in Irish waters once the present round of licences expires.
While new companies entering the market will pay tax at 55pc if they make discoveries, there will be no changes to the 40pc rate applying to existing exploration authorisations. The news was not unexpected; shares in Providence Resources and Fastnet were both trading slightly higher following the announcement.
“Taxation provisions relating to petroleum exploration and production are to be revised upwards to provide for an increased financial return to the State from discoveries made under future exploration licences and licensing options, Natural Resources Minister Pat Rabbitte told a conference yesterday.
The decision follows advice from a consultancy which was asked in March to examine Ireland’s tax laws for exploration companies amid concern that taxes were too low. The report was conducted by global energy consultancy Wood Mackenzie. The consultancy looked at tax regimes in nine countries including Canada, New Zealand, Spain and South Africa.
From now on, Ireland will maintain a concession system, with industry rather than the State bearing the risk associated with investing in exploration, Mr Rabbitte said.
Some form of production profit tax will continue to apply in Ireland but discoveries made under future licences will be taxed on a field-by-field basis with the rate varying according to the profitability of the field and charged on each field’s net profits;