THE TAX RATE on oil and gas fields will be hiked to 55% under a surprise plan left out of this month’s Budget announcement.
The so-called Petroleum Product Tax would increase the levy from 40% to a new top marginal rate for any successful projects to come from future exploration licenses.
If passed through the Dáil with other Budget measures, it would also give the government a faster cut of the income from producing fields.
A minimum payment of 5% of the annual revenue from any commercial oil or gas field would be siphoned to the state under the laws.
The Department of Finance said the ultimate level of tax resource companies paid would be “determined on a variable basis depending on the profitability of an individual field”.
The tax would be paid on top of the 25% corporate tax rate that already applies to any profits from oil and gas exploration.
The waiting game
However it could be a long time until the Exchequer enjoys any benefit from local oil production with the domestic industry still non-existent.
While there has been a lot of attention given in recent years to the “billion-euro” Barryroe field off the coast of Cork, for example, licensee Providence Resources is yet to find a farm-out partner for the project.
It and other exploration companies have been hit this year with the plummeting price of oil. A supply glut from major producers like the US and the OPEC nations have made it less viable for expensive offshore projects to be developed.
Four commercial natural gas fields have been discovered in Ireland since the early 1970s with the latest, the Corrib field off the Mayo coast, due to start production before the end of the year.
Deloitte tax partner Joan O’Connor said the effect of the tax was “difficult to predict” but it placed a further burden on explorers at a time of uncertainty.
Notwithstanding significant advances in technology for petroleum production, vast areas of the Irish offshore remain available but are very difficult for the industry to explore,” she said.
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