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Tax Reliefs

Dáil Éireann Debate, Tuesday - 15 June 2021

Tuesday, 15 June 2021

Questions (373)

Gerald Nash

Question:

373. Deputy Ged Nash asked the Minister for Finance his views on the finding from a recent report (details supplied) that eliminating some of the fossil-fuel tax reliefs could generate a significant amount of revenue while simultaneously promoting a cleaner environment; his plans to examine the elimination of such fossil-fuel tax reliefs; and if he will make a statement on the matter. [31613/21]

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Written answers

While there is no globally accepted definition of Fossil Fuel Subsidies, the OECD defines a subsidy as the result of a government action that confers an advantage on consumers or producers, in order to supplement their income or lower their costs. This definition includes tax expenditures such as tax rebates, tax repayments and reduced tax rates, as well as direct subsidies.

The Central Statistics Office (CSO) Fossil Fuel Subsidies 2019 publication estimates total fossil fuel subsidies amounted to €2.4 billion in 2019. Direct fossil fuel subsidies accounted for 11% of total fossil fuel subsidies in 2019 while indirect subsidies arising from revenue foregone due to tax abatements accounted for 89%. The CSO estimates that the largest of these reliefs was the exemption from excise and carbon taxes of jet kerosene used for commercial flights, costing €634 million per year, while the lower rate of fuel duty applied to auto-diesel relative to petrol is estimated to amount to €400 million per year. The ESRI May 2021 Budget Perspectives Paper referenced by the Deputy refers to the possible removal of these reliefs and the potential additional revenue raised.

With regard to the exemption on aviation fuel for commercial flights, the Deputy will be aware that Ireland’s excise duty treatment of fuel used for air navigation is based on European law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive. Under this Directive, Member States are obliged to exempt certain fuels used for commercial aviation purposes from excise duty. The scope of this exemption must include jet fuel (which is the most commonly used heavy oil in air navigation) and must encompass such fuel used for intra-Community and international air transport purposes. The Commission is working on a proposal to revise the ETD and it is expected that changes to the current fossil fuel related reliefs and exemptions will be proposed.

On a national level, it is recognised that gradual removal of fossil fuel subsidies will play an important role in phasing out reliance on fossil fuels in the transition to a low carbon economy. To achieve this transition with minimum disruption, the Programme for Government commits to providing timely signposts as well as regulatory changes and incentives giving society and industry the chance to adapt.

As part of the annual budget process, the Tax Strategy Group will examine indirect environmental tax subsidies and examine options in this regard, having due regard to the EU legislative framework in this area.

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