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Dáil Éireann debate -
Wednesday, 1 Dec 1999

Vol. 512 No. 1

Financial Resolution No. 3: Hydrocarbons.

I move:

(1)THAT in this Resolution–

"kerosene" means hydrocarbon (heavy) oil of which more than 50 per cent by volume distils at a temperature not exceeding 240º Celsius;

"the Order of 1975" means the imposition of Duties (No. 221)(Excise Duties) Order, 1975 (S.I. No. 307 of 1975);

"the Order of 1987" means the Imposition of Duties (No. 285)(Excise Duties) Order, 1987 (S.I. No. 19 of 1987);

"tax warehouse" has the meaning assigned to it by section 103 of the Finance Act, 1992 (No. 9 of 1992).

(2)THAT the amount of any rebate allowed under paragraph 12(3) of the Order of 1975 shall, in respect of any kerosene, which is imported or delivered from a tax warehouse on or after 2 December, 1999, be the amount of excise duty chargeable less an amount calculated at the rate of £2.50 per hectolitre in lieu of the rate specified in paragraph 5(8) of the Order of 1987.

(3)IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution provides for a reduction in the rebate of excise duty for kerosene which, when VAT is included, amounts to almost 1.4p on a litre with effect from midnight. The decrease is expected to cost the Exchequer approximately £0.9 million for this year and almost £11 million in a full year. The effect on the CPI is a reduction of 0.01 per cent.

This resolution deals with petrol derivatives and there is at present a problem for motorists. We have a free market for petrol and petrol products. The cost of a litre of petrol of the same brand varies from the city to rural areas. There can be as much as 12.5 to 15 per cent of a price differential between the cost of petrol in Dublin and the west. While I welcome this reduction can the Minister explain how this measure is included in the cost of living index? Why is the Government not investigating the cost of petrol nationwide to see how these differentials could be eliminated?

I wish to address this issue in the context of the section on environmental taxes to which the Minister for Finance referred. I would have thought that two years or more after the Kyoto Summit this Government would have brought forward firm proposals for the introduction of green taxes and for a shift from personal taxation and taxation on employment to environmental taxation. Instead what we have is a reference to the matter being raised by the Minister for Finance with the social partners in the context of Partnership 2000, quite a remarkable position for the Government to take.

I find it difficult to believe that the Government, which has responsibility for taxation and fiscal matters, is somehow going to raise, by way of negotiation with the social partners, its position on environmental taxes, given that two years ago, by way of international agreement at Kyoto, it made certain commitments which have not been met.

Since the Kyoto Summit, this country, which committed itself to targets that allowed for an increase in the level of emissions agreed at that summit, has failed to meet those targets. We have fallen well behind the commitments we made at Kyoto. In addition, we are facing an embarrassing situation in view of the fact that the European Commission is taking the Government to court over its failure to deal with air pollution, the quality of water and other environmental problems.

Given that this budget has been introduced at a time when the Government has considerable resources available to it, has there ever been a better opportunity to shift from personal taxation to green taxation? The case in favour of such a move was eloquently made last March by the Minister for the Environment and Local Government. I quote:

My own view is that once-off policy choices, necessary to meet the immediate target will not be sufficient to prepare us for the ongoing challenge . I am firmly of the view that we should utilise the fiscal system to assist meeting environmental objectives and securing more sustainable patterns of production and consumption.

. the use of economic instruments like taxation or emissions trading can make more apparent the true cost of resource use or of pollution. Equally, these can provide an effective incentive, both to potential polluters and to consumers, to change their behaviour and maximise the efficiency of their energy or resource use.

The Minister made these comments in a speech to the ESB. Clearly he did not make the same speech to his Cabinet colleagues or, if he did, they did not pay him any heed.

There is nothing in the budget which reflects any move on the part of the Government to address, by way of fiscal measures, the commitments this country made at Kyoto. The only provision made in the budget in this regard is the reduction in excise duty on kerosene. I have no doubt this will be welcomed by householders who are obliged to pay for heating oil. However, there remains the question of energy efficiency. If the excise duty on kerosene is reduced in this way, we will move away from the targets that have been set. Such an action also runs contrary to the high-brow comments made by the Minister for the Environment and Local Government and other Government spokespersons in relation to energy efficiency, reducing emissions and honouring the commitments entered into at Kyoto.

How is it possible that this resolution will have effect from 2 December when Financial Resolution No. 1 will not have effect until 1 January 2000? That distinction must be explained.

Financial Resolution No. 3 refers to the Provisional Collection of Taxes Act, 1927, which allows a resolution of this House, while it sits in Committee of Finance as we are now doing, to have the same effect as if it were passed through all Stages of legislation to become law. The Provisional Collection of Taxes Act does not specify that it is not possible to introduce such resolutions to have immediate effect and it does not require them to take effect from 1 January or any other date. The Act is quite open in terms of the date from which a provision should take effect. I presume that a tax could be reduced retrospectively if that is what the House desired. I would be grateful if the Minister would explain the reason for this distinction.

I support Deputy Gilmore's comments. Ireland faces comparatively few economic problems. However, among those problems are the housing shortage, the labour shortage and our obligations under the Kyoto Accords. The Accords require us to, in effect, reduce our emissions of greenhouse gases. The Government, which indicated that it would do so in last year's budget, has an obligation to produce a comprehensive plan indicating how it intends, under each of the headings of the different producers of greenhouse gases – agriculture, transport, housing, etc. – to reduce emissions in each of the years between now and the date by which we must complete these reductions. It must produce a plan which shows the methods – a combination of taxes and other restraints – by which it proposes to reach the targets set at Kyoto.

The House should take the commitments made at Kyoto seriously. I do not believe the Government is taking them seriously, in the same way it does not take tax policy seriously. A Government that can change its income tax policy and its cigarette taxation policy so freely is not one I would expect to take the commitments it made at Kyoto seriously. It is clear that the Government does not take those commitments seriously because all it has produced is an isolated measure which has no policy context and which gives no indication of the destination at which the Government intends to arrive.

In the midst of the best period in its history, this is probably the worst Government the country has ever had. It is a Government with limitless opportunities and the most limited vision; a Government of mediocrities holding office at a time of historic opportunity.

How will consumers benefit from this proposal which comes into effect from tomorrow? Who is responsible for ensuring that they benefit from the proposed reduction? If we consider Financial Resolution No. 1, which does not come into not come into effect for one month, I have no doubt that a system will be put in place to prevent the £5 reduction being passed on to consumers. The provisions in Financial Resolution No. 2 were revealed in the evening newspapers two weeks ago and the people who purchased £20 million worth of cigarettes will make £1 million as a result of the passage of this resolution. A number of individuals, friends of certain people, were informed about the provisions in Financial Resolution No. 2 and were given the opportunity to purchases huge numbers of cigarettes which they will now sell at an enormous profit to those who smoke.

Will the Minister indicate who has responsibility for informing ordinary punters who use kerosene and who order a delivery on Friday, Saturday or next week that the reduction proposed in Financial Resolution No. 3 will be passed on to them? The consumer price index, to which Deputy Carey referred, never reflects, in real terms, the reductions that are introduced.

Deputy Carey also referred to the price of petrol and other products used to power motor vehicles. I carried out a survey on 26 or 27 petrol stations in the midlands two years ago and the price differed by between 12 and 37 pence per gallon. I am sure that if one travelled to Cork or Kerry it would be the same because those who control and import these products can decide to increase or decrease prices in two specific counties or regions while doing the opposite in two other areas without any loss given that they have a monopoly. The Minister for Finance is pretending that the price of kerosene home heating oil has been reduced. Government Members will not be able to tell us tomorrow or in two weeks that people will be able to buy home heating oil more cheaply.

I refer to the excise duty that will apply to cigarettes from midnight. It could result in unfair trading because the duty only applies to cigarettes from bonded warehouses. Large retailers will have a considerable advantage over small retailers who have little or no stock on hand. I welcome the increase and every retail outlet should be subject to the increase. A huge amount of wholesalers have considerable stock and they will be at an advantage as Christmas, which is a peak time for sales, approaches. The Minister should examine this because the price of 200 cigarettes will increase by £5 and the excise duty should affect retailers as opposed to bonded warehouses.

We dealt with that Financial Resolution earlier.

I agree with Deputy Farrelly. We should concern ourselves with the consumer at the end of the day and if the Government wanted to do something tangible with regard to home heating oil, which would impact directly on the consumer, it should have reduced VAT on such oil. Deputy Farrelly is correct with regard to excise duty and the saving of £10 million per year. Home heating oil will cost less but the reduction only applies to the family in which only one person works. This is discriminatory and biased.

They have to heat their homes for a longer time if they stay at home.

I often wonder whether that is hypocritical. There was reference earlier, to the Minister's magnanimous gesture with regard to the 50p increase in excise duty on cigarettes, about which none of us had an opportunity to speak. The State currently earns £800 million from cigarette sales with tax accounting for three quarters of the price of a pack of cigarettes.

Deputy Finucane, we have moved on from that Financial Resolution.

The important element of a budget is what is in it for the consumer. Many people will find very little in it. The proposed reduction in excise duty on home heating oil is similar to a three card trick. A more meaningful proposal could have been adopted.

Will the Minister estimate how much the Exchequer loses as a result of the smuggling trade, which is evident daily in Henry Street in Dublin as nothing is done about it? I note that the proposed increase in excise duty will save £132 million but how many millions are lost—

Deputy McGahon, are we back to the Financial Resolution No. 2?

No, what is the estimated loss—

We have a limited time to deal with Financial Resolution No. 3 on kerosene.

Does he agree that it is likely that the industry will be driven even further underground and a great deal of money will be made by people in the twilight zone from south Armagh, who will profit from this imposition? What is the biggest problem facing—

Deputy McGahon, you have made your point. We want to go back to Financial Resolution No. 3.

What is the rationale behind the reduction in the excise duty on kerosene oil? How does it currently impact on the Exchequer?

: Deputy Bruton and others referred to the excise duties on cigarettes and fuels or other bonded goods, such as drink. Traditionally, the increases apply from budget night because these products can be hoarded. One Member referred to products which were in transit. There are reasonably sophisticated controls on the volumes of product which can be taken out of bonding during the lead-up to the budget. That does not mean that some individuals cannot benefit but a great deal of trouble is taken to regulate the sales of these products.

The abolition of the travel tax is welcome. The EU issue was raised but that only applied to air travel. The abolition of the tax also applies to sea travel and five million people travel to and from Ireland using this mode of transport. A considerable number of trips are booked for Christmas and people in the industry requested time to make the adjustment which is why the change will only take effect from 31 December. Many people will have booked their trips for Christmas and paid the travel tax. Others will be in the process of booking and it would be impractical for people in the industry to regulate the imposition of the tax. It is a substantial reduction which will amount to £20 million next year.

With regard to the Kyoto commitments and kerosene, the Minister for the Environment and Local Government will introduce measures. He will contribute to the budget debate and elaborate on his views then. Deputy Finucane referred to the question of VAT on kerosene. The reduction is 0.01 per cent of the CPI but the problem is that in Ireland that VAT is charged at 12 per cent in addition to excise duty while in the North and Britain, VAT is charged at 5 per cent but there is no excise duty which ties in with Deputy McGahon's reference to smugglers. There is a serious problem in the Border area but this measure will at least contribute to equalising the position.

What about reducing the VAT rate to 5 per cent in the interest of the consumer?

The Deputy suggests that the Minister should have gone further.

Most European countries do not charge VAT.

I understand that. The Minister is reducing revenue by £11 million per year, which is sizeable. With regard to the duty on cigarettes £125 million will go to health services.

Minister, a passing reference is acceptable but that resolution has been dealt with.

For the first time it will go into health. As Deputy Bruton is aware, our friends in Revenue and the Department of Finance never want that to happen because they prefer to keep all the funds in one basket. However, it will go from there into health and towards trying to tackle the problems of cardiovascular disease in which the Leas-Cheann Comhairle is also interested.

Prevention is also important.

My query relates to the part of the motion dealing with kerosene. I understand from the programme for Government that it is the Government's policy to carry out an eco audit on every policy measure undertaken by it. The revised programme for Government states that the eco auditing has been most successful and that it is being done in every area of policy. Was an eco audit carried out on this policy measure? If so, by whom? What conclusion was reached in the audit? To what extent will this reduction in the price of kerosene contribute to energy efficiency? How it is squared with stated Government policy in relation to energy efficiency?

No conferring, Minister.

I thought I had explained that the purpose is to displace smuggled kerosene.

What about the eco audit?

As far as that matter is concerned and in terms of my responsibility as Minister for the Marine and Natural Resources, we are planting as many trees as possible.

In the sea?

We have a major programme which has a big impact in this area.

I am fascinated by the idea of the Minister for the Marine and Natural Resources planting trees in the Irish Sea.

I also have responsibility for forestry.

This measure is not confined to the Border counties. It is a long way to go to smuggle kerosene from County Tyrone to west Cork.

Not at all. Ask Deputy McGahon.

What was the estimate of the amount of kerosene being smuggled? How much home heating oil was black heating oil from across the Border?

I understand that smuggling is one of the principal means of finance for subversive organisations. I am aware that one particular brigade of the IRA has been maintained in existence almost entirely from the proceeds of smuggling. It was one of the most deadly IRA brigades in terms of the number of people killed during the Troubles. If the Real IRA is not to raise its head, smuggling must be dealt with and an approximation of taxes across the Border is an important consideration in terms of denying the life blood of subversive organisations.

Will the Minister indicate whether, in addition to eco audits, smuggling incentive audits could be included in future tax policy proposals? This would minimise the extent of divergence in tax and thereby minimise the potentially large amounts of revenue which could go to the Real IRA and other organisations involved in subversion. The south Armagh brigade of the IRA has been maintained in existence by smuggling and in particular by individuals who are able within their property to transfer diesel and other items across the Border.

I accept the Deputy's point that it is a major problem. This is the reason for the measure. It is not possible to put an exact figure on it, but it is well known that there are advertisements in the Northern counties which relate to selling smuggled fuel. The term "smuggling incentive audit" could be misunderstood if it was not expressed properly. The Customs and Excise authorities will carry out their audits but this area is not easily audited.

If the Minster read the book Bandit Country, he would know that the south Armagh brigade has been maintained by smuggling for years. That is how it was funded. The south Armagh brigade has funded the entire IRA for a number of years from the proceeds of smuggling.

There is an incentive wherever there is a difference. If such an incentive exists, the opportunity exists, but the Minister is reducing that incentive in this measure.

The Minister should read the book. He prefers to read books on piracy.

The Minister did not tell me anything about the price of petrol.

Financial Resolution No. 3 agreed to.

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