Dáil Éireann Debate, Thursday - 16 January 2014
25. Deputy Denis Naughten asked the Minister for Finance the estimated loss to the Exchequer as a result of fuel laundering; the steps taken to curb this practice; and if he will make a statement on the matter. [1606/14]
View answerI am advised by the Revenue Commissioners, who have responsibility for the collection of mineral oil tax and for tackling illicit trade in mineral oil products, that estimating the extent of any illegal activity and the associated cost to the exchequer is inherently problematic.
The most serious risk in relation to illicit trade in mineral oil products is from the laundering of markers from diesel that is subject to a reduced rate of mineral oil tax on condition that it is not used for road vehicles. Revenue collects some €1.1 billion annually in excise duty from road diesel and, while there is no reliable estimate of the scale of the problem, they recognise that the potential for loss of tax revenue from fuel laundering represents a significant threat to the Exchequer and to the legitimate trade.
Fuel laundering, to remove the marker added to lower-taxed mineral oil for off-road use, has been a problem for many 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 the change, fuel laundering became more viable and criminal gangs intensified their laundering and distribution activities dramatically from the first half of 2011.
In response to the intensification of fraud in this area, Revenue 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.
Revenue’s 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 monthly fuel transactions. 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 enables Revenue to identify suspicious or anomalous fuel transactions and patterns of distribution. Traders found to be involved in suspicious activity are investigated and if they are unable to account properly for the source or disposal of product face revocation of their licence, tax assessment and prosecution, where appropriate.
In addition, Revenue and HM Revenue & Customs in the UK are collaborating on identifying a more effective marker for use in both jurisdictions and signed a Memorandum of Understanding in May 2012. A number of proposals for a new marker were received in response to an Invitation to Make Submissions and were evaluated by a joint evaluation group. The evaluation group has completed the final evaluation and presented its recommendations to the joint project board. The final decision on the implementation of any new marker rests with the Economic Secretary to the Treasury in the UK and the Board of the Revenue Commissioners in Ireland; the Revenue Authorities expect to make an announcement shortly.
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 period from 2011 to end December 2013 119 filling stations throughout the State were closed for breaches of licensing conditions. Since the beginning of 2011, over 2.7 million litres of fuel have been seized and 29 oil laundries detected and closed down, including 9 oil laundries in 2013.
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 that the use of laundered fuel poses to their vehicles and that sourcing fuel in this way is funding criminal activity.
The legitimate trade can also contribute to closing down this illicit 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 Revenue. Any such reports are treated as confidential and are fully investigated by Revenue.
