Response to article by Minister Rabbitte on oil and gas deposit taxation

This is a statement that I issued to media outlets today:
“In today’s Irish Times Minister Pat Rabbitte T.D. argues that Ireland’s tax take on our oil and gas: “compare favourably with all similar countries but not with Norway.” This is complete nonsense.

“A report by the US Government Accountability Office in 2007 found that Ireland has the second lowest government take on oil and gas deposits of 142 countries studied. The Department of Communications, Marine and Natural Resources reported in 2006 that average government takes range from 25% -90% across the world. They further found that the European average government take excluding Ireland is between 35% – 65%. The assertion that the Irish government take at 25% compares favourably only rings true for the corporations that wish to exploit our resources. For the rest of us it represents an insane act of economic treason, offering to give away some €750 billion worth of oil and gas over the coming decades at the worst possible terms and conditions for the Irish people and Irish economy.

“The headline figure of 25% tax cited by Minister Rabbitte will never be applied under our current taxation regime due to the generous availability of tax loopholes to offset exploration and drilling costs. Recent Research by William Hederman (see www.irishoilandgas.com) reveals that corporations may pay as little as 7% of the revenue from Irish oil and gas fields. The application of tax on declared profits only and not on the actual wealth and value of the oil and gas reserves further benefits oil corporations to our detriment.

“Minister Rabbitte further argues that a lack of interest from multi-national companies in Ireland over the last two decades vindicates the tax regime that was put in place by Fianna Fáil. He fails to acknowledge that our oil and gas reserves are now a much more attractive proposition for exploration and drilling than two decades ago. There are three key reasons for this:
• First as larger oil and gas deposits elsewhere are depleted, attention is turning to smaller deposits such as those located on our offshore.
• Secondly rising oil and gas prices determine that smaller deposits are now a viable proposition.
• Thirdly technological advances in exploration and resource exploitation over the last two decades have increased profitability rates from smaller fields.

“These three key changes have dramatically altered the oil and gas exploration market requiring that we urgently re-examine our tax take before the latest round of licences are granted. It is time that we ditch the failed economic policies of Fianna Fáil and instead we should adopt at least the European norm in tax take for oil and gas. It is absolutely certain that our off shore fields will be exploited over time. The only question is will we benefit from the exploration of the natural resources that we own.”

Fintan O’Toole’s original article is here:

http://www.irishtimes.com/newspaper/opinion/2011/0816/1224302525090.html

Pat Rabbitte’s article is here:

http://www.irishtimes.com/newspaper/opinion/2011/0818/1224302638286.html