As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. Having said that, the Deputy will be aware that the Climate Action Plan 2019 provided a commitment to assess a Carbon Tax trajectory of at least €80 per tonne by 2030, having regard to considerations on the social and economic impacts.
A carbon tax was introduced in Ireland on a phased basis beginning in 2009. Initially it applied to transport fuels, and was extended to other non-solid fuels (such as kerosene, green diesel, liquefied petroleum gas and natural gas) in May 2010. When introduced, the rate was €15 per tonne of CO2 emissions and this was increased to €20 per tonne in December 2011. Carbon tax was extended to solid fuels at a reduced rate of €10 per tonne from May 2013 which increased to €20 per tonne in May 2014. In 2018, the VAT exclusive yield from carbon tax was approximately €431 million.
While hypothecation is not a feature of the Irish taxation system in general as it can constrain the flexibility of the Government in expenditure decisions, the Joint Oireachtas Committee on Climate Action recommended that hypothecation of carbon tax revenues be considered. To this end my Department conducted a public consultation on the options for use of revenues raised from increases in the carbon tax. Among the options presented were a “tax and dividend scheme”. There were 66 respondents to the consultation, representing businesses, private individuals as well as social, voluntary and community and “other” sectors.
The most favoured options were ring-fencing additional carbon tax revenues for the purposes of enhancing the current Sustainable Energy Authority of Ireland (SEAI) grant scheme for household energy efficiency improvements and to fund sustainable transport infrastructure. The option of returning the proceeds by way of dividend to citizens or households through the social welfare and/or tax system received a negative response overall, being one of the least supported and most opposed options.
In the context of Budget 2020 and future tax policy, I will consider all options relating to the carbon tax.