I am advised by the Revenue Commissioners, who have responsibility for the collection of mineral oil tax, that the cost of adding the prescribed markers to rebated fuel is borne by the industry rather than the Exchequer. It has been suggested recently that huge savings could be made by moving from the current system of marking rebated fuel to one based on making repayments to those users that currently use marked fuel. This seems to be based on the erroneous view that adding the prescribed markers to rebated fuel is exceptionally costly and is borne by the Exchequer. This is not the case; the cost of the markers is negligible and is borne by the industry. The cost to the exchequer of marked fuel is the tax foregone and an alternative system based on direct repayments to users would not produce any savings for the exchequer and might be more costly if the incidence of fraud were greater. This system of marking diesel has been an effective and efficient means of delivering a tax rebate on a product used by a very large number of users across a wide range of uses. Fuel laundering to remove the marker added to lower-taxed mineral oil for off-road use has been a persistent problem over the years. However, it remained a marginal activity because the sulphur content of marked fuel was higher than that for road fuel and therefore the sulphur content continued to distinguish laundered fuel from genuine road fuel. Environmental requirements in relation to the sulphur content of fuel changed from the beginning of 2011, which resulted in marked fuel with the same sulphur content as road fuel coming onto the market. With this change, fuel laundering became more viable and criminal gangs intensified their laundering and distribution activities dramatically from the first half of 2011.
The Deputy will appreciate that it is not possible to estimate accurately the loss to the Exchequer from particular activities in the shadow economy such as fuel laundering. It is clear, however, that illegal activity in the fuel market is significant, and that it poses a threat to the tax yield and to legitimate business. Revenue, therefore, has made action against fuel laundering one of its priorities and is implementing a comprehensive strategy to tackle the problem through enhanced supply chain controls, the acquisition of a more effective fuel marker and continued robust enforcement action. This strategy included strengthening the licensing conditions for auto-fuel traders in 2011 and the introduction of a new licensing system for marked fuel traders in October 2012. In addition, since January 2013, all licensed fuel traders are required to make electronic returns to Revenue of their fuel transactions each month. These supply chain control measures are designed to make it difficult for fuel criminals to source marked fuel for laundering and to get laundered product onto the market. Analysis of the monthly returns of fuel trading will enable Revenue to identify suspicious or anomalous fuel transactions and patterns of distribution. Analysis of the first few months of returns data is well advanced. Traders found to be involved in suspicious activity will be investigated and if they are unable to account properly for the source or disposal of product will face revocation of their licence, tax assessment and prosecution where appropriate. In addition, Revenue and HM Revenue & Customs in the UK signed a Memorandum of Understanding in May 2012 on a joint approach to finding a more effective marker for use in both jurisdictions. A number of proposals for a new marker submitted in response to an Invitation to Make Submissions are currently being evaluated. The outcome of this process is expected later this year. Revenue, in co-operation with other law enforcement agencies on both sides of the border, continues to intensify enforcement action against fuel fraud and this work has yielded significant results to date. In the past two years 97 filling stations throughout the State were closed for breaches of licensing conditions. Since the beginning of 2010, over 2.8 million litres of fuel have been seized and 29 oil laundries detected and closed down, including 5 oil laundries in 2013 to date. Revenue regularly reminds motorists and the public generally that, in addition to its impact on the exchequer and legitimate trade, they should be aware of the risks posed to their vehicles by using laundered fuel and the fact that sourcing fuel in this way is funding criminal activity. The legitimate retail trade can also contribute to closing down this illegitimate trade by providing information on the outlets that are selling laundered diesel. Revenue chairs the Hidden Economy Monitoring Group (HEMG) and has established Regional sub-groups of the HEMG to facilitate the reporting of information by traders through their representative associations. Retailers who suspect or have evidence that laundered diesel is being sold in their area should report this through their representative associations to the Revenue. Such reports are treated as confidential and are fully investigated by Revenue.