Ireland will increase the maximum tax rate on oil and gas fields from 40% to 55%.
Ireland’s Minister for Finance, Michael Noonan T.D, on Thursday published Finance Bill 2015 that gives effects to taxation measures announced in Budget 2016.
Following a review by the Department of Communications Energy and Natural Resources, the Bill introduces a “Petroleum Production Tax”, the purpose of which is to ensure that discoveries made under future exploration licenses will result in an increased financial return to the State and at an earlier point in time. It will replace the Profit Resource Rent Tax which was introduced in Finance Act 2008.
The Petroleum Production Tax (PPT) will provide that:
– Once a field starts producing oil or gas, a minimum payment of 5% of annual gross revenues will be due annually;
– The ultimate rate of tax and amount due will be determined on a variable basis depending on the profitability of an individual field and will be payable in addition to the existing 25% rate of corporation tax that applies to the profits from oil and gas exploration;
– The operation of the Petroleum Production Tax will result in an increase in the maximum marginal tax take on a producing field (combining corporation tax and petroleum production tax) from 40% to 55%.
Rabbitte: New proposals are fair
Pat Rabbitte, Labour Party TD for Dublin South-West constituency, welcomed the new tax regime for offshore exploration.
Rabbitte said: “I want to welcome the proposals in the Finance Bill 2015 for a new tax regime for offshore oil and gas exploration.
“The proposals keep faith with a government decision that I sponsored in May 2014 when Energy Minister, and derive from the Wood Mackenzie Review of our oil and gas fiscal system presented to me earlier that year.
“The new regime provides for an increase in the overall State take and an earlier share of the revenue to the State.
“There will be a new tax called the Petroleum Production Tax (PPT) that will apply in respect of authorisations after June 18 2014. A minimum PPT payment of 5% will function like a royalty on a field-by-field basis and will result in the State receiving a share of revenue in every year that a field is selling production.
“A maximum rate of 55% will apply in the case of new licenses compared with a maximum rate of 40% under the current fixed regime.
“I believe these new proposals are fair and will engender industry confidence in the stability and predictability of Ireland’s oil and gas fiscal terms and signal certainty for the decade ahead. I thank the Minister for Finance, Michael Noonan TD, for giving expression in law to the terms of the Wood Mackenzie report and I am also grateful to the Dail Committee under the chairmanship successively of Andrew Doyle TD and John O’Mahony TD who worked with me to achieve this end.
“It now remains for us to encourage enhanced offshore exploration in the years immediately ahead.”
Offshore Energy Today Staff