Andrew Doyle (Wicklow, Fine Gael) | Oireachtas source

I thank the Leas-Cheann Comhairle. I welcome the opportunity to speak on this report. I note that the last occasion of these statements was 14 May and events have deferred the matter a couple of times.

I was Chairman of the then Joint Committee Communications, Natural Resources and Agriculture and I note that two of my colleagues, Deputies Martin Ferris and Pringle, are here with me in the Chamber this evening. The reason we set about producing the report in the first place was that there was much in the media dating back over a number of years about the way the resources were being allegedly abused and taken from the public good in the west. It made producing such a report a timely matter for us. We felt it was important to establish the facts, separate fact from fiction and dispel some myths. At the time there were constant references to the estimated amount of oil and gas reserves in Irish territory, usually quantified in billions of euro, but it had not been found. It was also stated that the Government had given it all away.

We set about our job. We held hearings involving several key stakeholders - those involved in oil exploration, the communities which had borne the brunt of what they felt were unfair practices and had been exploited, and other jurisdictions, in particular, Norway, the help of whose Ministry and ambassador I must acknowledge.

First, we found that, by comparison with other countries, namely Norway and the United Kingdom, the exploration that had taken place in Ireland over the past 40 years was minuscule. If one does not look for something, one will not find it. We had to ask the question: what was the reason companies were not so inclined to carry out exploration in Irish waters? If it was the case that the Government would give it all away, it would seem that was not a reason. The main reason was that nobody had found it. It was not seen to be viable or profitable to establish and take the risk of exploring for oil, gas and natural resources, in particular, off the Irish coast.

We then set about identifying the key priorities and followed them with recommendations. We based our recommendations on Article 10.1 of Bunreacht na hÉireann, which states:

All natural resources, including the air and all forms of potential energy, within the jurisdiction of the Parliament and Government established by this Constitution and all royalties and franchises within that jurisdiction belong to the State subject to all estates and interests therein for the time being lawfully vested in any person or body.

In other words, the resources of the State are for the benefit of the people of the State.

On the other hand, it is expensive to carry out exploration, especially in the challenging territories such as where the most potential seems to lie, off the west and north-west coasts of this country, and it would be folly for Ireland, even if it were flush with resources, to engage in exploration. Rather, it was better to try to tap into the potential by way of a suitable tax regime on foot of any discoveries. For those purposes, we set about looking at what was in place.

We acknowledge that, in 2007, the previous Government brought in a different regime to the one that had caused so much of the grief. Following on an Indecon report, a profit resource rent tax, PRRT, was established with a scale of taxation based on relative profitability of each field. Basically, it added 5%, 10% and up to 15% on top of corporation tax for any company the profit ratios of which reached in excess of 1.5:1, 3:1 and 4.5:1, respectively. We stated simply - we knew this would cause the most stir but maybe that was deliberate to get people thinking - that in between each offer of licensing rounds there should be a review carried out. Basically, that review should examine what had happened with the previous round of exploration, discover whether any significant viable discoveries been made, and if so, what was the likelihood on the next round of more of them being found. If it was the case that it was felt that more viable discoveries would be made, we could look at increasing the rate the Government would take on behalf of the people by way of increased profit resource rent tax.

The figures for overall tax take of 40%, 60% and 80%, respectively, became the popular ones that were thrown out. That is what it would amount to in very profitable fields. I note the Minister, in his opening statement, stated that perhaps the committee was indicating that such is what we should aim towards in the event of us having a level of activity and discovery similar to that in some of our neighbours, and that is exactly what we meant.

This report is a template. It contains quite a good deal of statistical evidence assembled. It states that in the event, after each round, on review it is felt that companies would be prepared to come in because the risk is decreased and the chances of viable discoveries are increased, then they should be prepared to pay more to the State. That is fair and reasonable. It works in other countries.

I would make a couple of points. First, whatever arrangements are made should be stuck to. If somebody is fortunate enough to make a discovery under a tax regime which, if it had not been made quite so soon, might have been higher, then that is his or her good fortune. The Ekofisk field in Norway was discovered on Christmas Eve 1967, one week before a three-year exploration licence was due to expire - that became known as the mother lode for the Norwegian oil and exploration sector from which the economy has benefited massively ever since. We are not saying that we should adopt a Norwegian rate of tax without Norwegian levels of discovery. We are simply saying that if and when this estimated potential becomes more realisable, we should look in each round of exploration licences at the levels of tax we are charging.

Under the current system profit resource rent tax does not become chargeable until the profit ratio is greater than 1.5:1. The committee recommends that the profit resource rent tax should be charged on profits from the moment they are earned. Corporation tax is not directly linked to discoveries in the field. In other words, companies could have other activities in the country and their corporation tax would not necessarily be as high as it might be, for various reasons such as write-offs. The committee recommends that when an exploration field becomes profitable there should be some level of tax from the moment it becomes profitable. This is not unfair. The profit resource rent tax is such that all of the accumulated costs are offset every year for as long as the activity take place. The committee decided not to interfere with that.

I wish to thank and acknowledge the assistance and wholehearted co-operation of all members of the committee of all parties and none. Our work has been very worthwhile. We all welcome the opportunity to have our say. I had a letter published in The Irish Timestoday to correct an article. I am sure the Minister will be flattered that he was identified as having appointed our committee. I am sure he will be even more flattered to know that some commentators think he had absolute influence over all the Opposition spokesmen-----

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