Dáil Éireann Debate, Thursday - 27 February 2014
57. Deputy Eoghan Murphy asked the Minister for Finance his plans to cease the practice of colour coding diesel and replace the current scheme for farmers with a rebate system, or some other system, in order to eliminate the illegal diesel smuggling industry which operates at a huge cost to the State in terms of revenue forgone and the waste of Government resources. [10030/14]
View answerI am advised by the Revenue Commissioners who have responsibility for the collection of mineral oil products tax and for tackling the illicit trade in mineral oil products that the system of marking gas oil (diesel) has been an efficient means of delivering a tax rebate on a product used by a very large number of users across a wide range of uses. These uses extend well beyond agriculture to include the propulsion of trains, the operation of construction and industrial machinery, commercial sea navigation (including fishing) and for commercial and home heating purposes. Any change in the existing system would therefore impact across a wide range and huge number of users.
A change to a rebate system would involve the establishment of an expensive repayments system. This would give rise to significant costs and place an administrative burden on oil traders, users and the Revenue Commissioners. It would also pose significant cash-flow costs for those currently using marked gas oil. In addition, repayment schemes by their nature are very vulnerable to abuse. The introduction of a wide-ranging scheme such as that proposed would not necessarily offer greater security against fraud than the current arrangements. If fuel for off-road use was not marked under the proposed new system, it could be diverted easily for road use; if it was marked, it could be laundered as at present. It would also be the case that marked fuel from Northern Ireland would continue to be available and could be laundered by fuel criminals. For these reasons, I am not proposing the cessation of current marking system or the introduction of a wide-ranging rebate system such as that proposed.
While it is inherently difficult to estimate the extent of any illegal activity and there is no reliable estimate of the scale of illegal activity in the fuel sector, Revenue recognises that the laundering of the marker from marked gas oil represents a significant threat to the exchequer and to the legitimate trade. For this reason, Revenue has made action against this illegal activity one of its priorities and is implementing a comprehensive strategy to tackle the problem. Revenue's strategy includes the following elements:
- The licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability of the fuel criminals to get laundered fuel onto the market;
- A new licensing regime was introduced for marked fuel traders in October 2012, which is designed to limit the ability of criminals to source marked fuel for laundering;
- New requirements in relation to fuel traders' records of stock movements and fuel deliveries were introduced to ensure data are available to assist in supply chain analysis;
- Following a significant investment in the required IT systems, new supply chain controls were introduced from January 2013. These controls require all licensed fuel traders, whether dealing in road fuel or marked fuel, to make monthly electronic returns to Revenue of their fuel transactions. Revenue is using this data to identify suspicious or anomalous transactions and patterns of distribution that will support follow-up enforcement action where necessary;
- An intensified targeting, in co-operation with other law enforcement agencies on both sides of the border, of enforcement action against suspected fuel laundering operations; and
- following a joint process, Revenue and HM Revenue & Customs in the UK have identified a new product to mark rebated fuels in a move that will boost the fight against illegal fuel laundering in both jurisdictions.
Revenue also works with fuel sector representative bodies, which have been very supportive of the range of measures introduced to combat fuel laundering, to improve the integrity of the distribution system and minimise the risk of fraud. In support of this, I introduced a provision in the Finance (No. 2) Act 2013 that will make a supplier who is reckless in supplying rebated fuel for a use connected with excise fraud liable for the duty evaded. This new provision will strengthen Revenue's hand in dealing with those traders supplying fuel recklessly to dubious customers. Revenue has recently published guidelines for mineral oil traders which will assist them in identifying and avoiding such transactions.
Revenue chairs the Hidden Economy Monitoring Group and has established regional sub-groups to facilitate traders reporting suspicious matters through their representative associations on a confidential basis. This information can assist Revenue in closing down the illicit trade by identifying traders supplying fuel to launderers and by identifying outlets that are selling laundered diesel.
Revenue's enforcement strategy in the fuel sector has already yielded significant results. In the period from mid-2011 to end January 2014, 123 filling stations 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.
