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Green Party wants new terms on exploration rights for Irish gas and oil
Read more about: Energy, Green Party
From the Green Party:
The Green Party has called for the terms of the exploration rights of gas and oil off the Irish coast to be redrafted. The Party passed a policy calling for new terms at a recent meeting of its National Council. [...] While the Government and the main opposition parties continue to avoid discussion on the unbelievable decision, which began under the ministry of Ray Burke in the late eighties, to give away Ireland’s offshore oil and gas reserves without any royalties to the Irish State, the Green Party has taken a decision to try and reverse this.
This is something that is continually thrown around. The idea that the government gets absolutely no money from oil and gas exploitations is in my experience widely believed but is in fact false. All profits from oil and gas exploitation are subject to corporation tax at a rate of 25%. I don’t know about you, but I wouldn’t quite call 25% of the profit a give away. Maybe it is just me.
Of course the government taxes the profits that all companies make, but most companies don’t get billions of euro of free oil and gas from the state to make those profits with. The oil and gas under our ground and seas belongs to us.
Almost all contries charge large royalties for the right to take out the fuel, precious metals or other natural resources, and _then_ they tax the profits. The royalties are due regardless of whether the extraction company makes a profit or not – because the profit can easily be moved around to low-tax locations with transfer pricing.
It is utterly extrordinary that foreign multinationals can extract oil and gas in Ireland without paying a cent for it, one might even think that this was the result of bribes changing hands, if it weren’t for the fact that the process was overseen by that upstanding pillar of honesty, Ray Burke.
This attempt to confuse corporation tax (paid by all compaines in profit) with royalties (paid by extraction companies) is pretty typical Fianna Fáil spin to cover up their corruption.
Firstly William I am not a member of Fianna Fail our any party ever in my life despite the fact that many people seem to like to think I am. So this is really not Fianna Fail spin.
The standard rate of corporation tax is 12.5%. Extraction companies pay 25% or double what normal companies pay. They do pay to extract it. They pay 25% of the money they make from extracting it.
You could also say the gravel under ground belong to us. But do people give out about people quarrying for top soil? It is the exact same argument as for oil save for the profit margin and the fact that the success rate of extracting oil is less then that of extracting top soil.
The rate of finding comerically viable sources of oil in this country is a little over 1 in 30. Most companies no longer explore in Ireland as the likelihood of finding comerical oil is so low. In Norway it is 1 in 3 . Remember no sources of oil are being extracted in Ireland. Only 1 gas source, with Corrib being like it is. So if you were a company and you had to pay the same price for exploring in ireland as in Norway and you were over 10 times more likely to make money in Norway. Where would you explore.
This debate really has been done to death around the internet. I was just highlighting the fact that is rarely highlighted that 25% of the profits from oil go to the state.
The corporation tax issue is a red herring because it is easy to set profits to zero and move them to a subsitiary in a tax-haven, by selling the product extracted to that company at a convenient price. It is very likely that the tax take on this 25% corporation tax will be nothing at all.
This is why pretty much no other country in the world uses corporation tax as a device to return the value for extracted minerals to the country from which they are extracted.
Of course different countries set different royalty levels depending on the value of what is extracted, and the difficulty of extraction. This is the normal operation of a market – lower your price and you sell more. Any rational seller sets their price at the level that they expect to make the most money – too low and they’re losing money, too high and they’re losing customers.
Now, can you tell me, is there any market in the world where the seller sets the price to zero?
I find it very difficult to believe that this behaviour is that of a rational seller. It seems far more likely that the minister negotiating on behalf of the seller (Ireland) was, in fact, acting on behalf of the seller.
Couple this with the fact
a) the minister is now a convicted criminal as a result of taking bribes in other areas
b) those bribes were given by businessmen in return for commercial advantage
c) individual businessmen who benefited from the zero-price of Irish resources are known to be personally close to the convicted minister
and it doesn’t seem all that unreasonable to say that Ireland just might have been the victim of a rip-off
No you can’t. You only own the top few metres of any plot of land you have. The rest is the property of the state. Not the same argument, I’m afraid.
Norway, of course, and that’s the way it ought to be. The oil and gas isn’t going anywhere and leaving it in the ground until it becomes economically viable is just good business sense. However, by offering the extraction rights at low, low prices (i.e., nothing), the government is, well, throwing away perfectly good money.