The State agency responsible for promoting the shipping industry has defended a tax break which means that many shipping companies pay only a nominal tax on their profits, regardless of their level.
The Irish Maritime Development Office, which was established by the Government four years ago, said that if the break known as tonnage tax had not been introduced, the Irish shipping sector would have been decimated.
It said that strict rules regarding its operation meant that it was not open to abuse by companies or individuals seeking to minimise their tax liabilities.
Questions have been raised by Opposition politicians about the tonnage tax regime after it emerged that an Irish-owned private charter yacht could qualify under the scheme.
The Christina O, the former yacht belonging to shipping magnate Aristotle Onassis, was purchased by Irish investors in the late 1990s.
It would have qualified for capital allowance tax breaks over its €50 million refit, although a PrimeTime Investigates programme reported that the tax allowances were being challenged by the Revenue Commissioners.
It has been reclassified as a passenger ship and is now being managed from Ireland, which means it could also qualify for tonnage tax.
The Irish Times has also reported that Irish Ferries is one of the main beneficiaries of the scheme. It saved an estimated €3 million in tax payments in 2003, the first year of the scheme's operation.
Labour finance spokeswoman Joan Burton has criticised the fact that Irish Ferries was entitled to such a tax break, in the light of questions about the pay and conditions of some workers on their boats.
The Irish Maritime Development's chief executive, Glenn Murphy, said he was "quite clear" that the Irish shipping industry was "facing extinction" in 2002, before the tax break was introduced.
He said companies, including Irish Ferries, would have had no choice but to move their operations out of Ireland if the tax break had not been introduced, and that jobs would have been lost as a result. Other European countries had introduced a tonnage tax system and the European Commission was in favour of it to protect the EU shipping industry.
The tonnage tax has led to a number of ships not operating out of Ireland being registered here to avail of the tax break. Under the regulations ships must be managed from Ireland.
A number of management companies have been established in Ireland to help foreign ships and companies avail of the new tax regime.
The tonnage tax scheme was raised in the Dáil yesterday, when the Taoiseach was questioned about it by Labour leader Pat Rabbitte, who criticised the employment policies of Irish Ferries.
He said it had "decided to lay off 150 staff on the Irish-France routes and to transfer its crewing to a third party agency - in other words, to recruit cheap, non-national labour in breach of the labour regulations and to disemploy Irish workers.
"Is not the least that we could expect from these companies that are treated so well in terms of our tax code that they would observe high standards in work practices?" he asked.