Thursday, 16 Dec 2021

Written Answers Nos. 146-169

Insurance Coverage

Questions (146)

Matt Carthy

Question:

146. Deputy Matt Carthy asked the Minister for Finance if he will bring forward recommendations to address the high costs of insurance cover in the childcare sector. [61888/21]

Written answers

Minister for Finance

I am aware that the affordability of insurance is an issue of concern for some businesses. However, neither I nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products, nor do we have the power to direct insurance companies to provide cover to specific businesses or individuals. This position is reinforced by the EU Solvency II Directive framework.

Notwithstanding this, the Government keenly understands that access to affordable insurance is vital for businesses, and is therefore working to improve both the cost and availability of this key financial service through the Action Plan for Insurance Reform. This reform agenda is progressing well, with the first Implementation Report published last July showing that 34 of the 66 actions were complete.

One of the key achievements to date has been the implementation of the Personal Injuries Guidelines some six months ahead of schedule, which should provide much greater certainty regarding award levels, in addition to reducing awards for many common injuries. These should also lead to lower legal fees by encouraging greater use of the Personal Injuries Assessment Board to settle claims. The overall impact should therefore be to lower claims costs for insurers. In turn, it is the Government’s expectation that insurers will reflect any savings by reducing customers’ premiums. 

In this regard, Minister of State Fleming recently met with the CEOs of the main insurers here to assess their response to the Guidelines, and to emphasise the importance of insurers not undermining the Guidelines by settling for amounts that are inconsistent with them. I understand that this engagement was positive, and that insurers confirmed that they are committed to passing on savings from the Guidelines, and are adhering to them in their direct settlements.

In addition to lowering premiums, it is hoped that consistent use of the Guidelines will result in a more stable claims environment that will encourage existing insurers to expand their risk appetite, and help to attract new entrants into the Irish market. Work being undertaken by the Office to Promote Competition in the Insurance Market to attract new providers here, in conjunction with IDA Ireland, will seek to leverage this. In his recent meetings, Minister of State Fleming also impressed upon insurers the need to expand their risk appetite into ‘pinch-point’ sectors that are experiencing issues with availability and affordability of cover.

In conclusion, work to complete outstanding reforms under the Action Plan remains ongoing. Upcoming priorities of particular note with regard to the childcare sector and high footfall industries include changes to the duty of care, which the Minister for Justice is leading on. It is my intention to work with my Government colleagues to ensure that the overall implementation of the Action Plan can have a positive impact on the affordability and availability of insurance across all sectors of the economy, including childcare.

Credit Unions

Questions (147)

Jackie Cahill

Question:

147. Deputy Jackie Cahill asked the Minister for Finance his views on the need for future collaboration and co-operation in the credit union sector. [62242/21]

Written answers

Minister for Finance

Enhancing collaboration is rightly seen as central to the future of the credit union movement. Increased cooperation will allow credit unions to better serve their members by increasing the range of services offered.

There are many recent – and positive – examples of collaboration including current accounts, investment in social housing, agri-lending, retrofit lending and State supported SME lending. I would encourage credit unions to deepen their collaborative efforts. 

Banking Sector

Questions (148)

Gerald Nash

Question:

148. Deputy Ged Nash asked the Minister for Finance if he will provide an update on his plans to reduce the State’s shareholding in a bank (details supplied); the sale price and revenue raised to Exchequer from each reduction in the State’s shareholding in the bank since June 2021; the consultancy fees paid to date to a brokerage organisation for facilitating the sale of the State’s shareholding in the bank; and if he will make a statement on the matter. [62148/21]

Written answers

Minister for Finance

The Deputy is aware that my Department issued a press release on the 5th of November 2021 which provided an update on progress in relation to the Bank of Ireland share trading plan.   

As of the date of the press release, proceeds generated from the share trading plan since its launch amount to c. €249m. The Government has now recovered almost €6.2bn in cash from its €4.7bn investment in and support for Bank of Ireland over the 2009-2011 period.

The press release stated that shares have been sold through the share trading plan at an average price of €4.96 and the State’s directed shareholding in the bank had reduced from 13.9% to 9.3%.

Updates on the State's Bank of Ireland shareholding have been disclosed to the market each time the shareholding falls through a percentage point threshold as is required by the Stock Exchange and investment regulations. I can confirm the latest announcement in this regard was made on 18th November 2021 when the State's shareholding fell below 9%.

I cannot disclose any further details in relation to the plan at this point as it would be detrimental to maximising value from our shares, although I would add that the brokerage fees involved are extremely small in the context of the alternative disposal options that were available and the value generated for citizens.

Question No. 149 answered with Question No. 139.

Question No. 150 answered with Question No. 103.

Financial Services

Questions (151)

Pearse Doherty

Question:

151. Deputy Pearse Doherty asked the Minister for Finance the correspondence he has had with the Irish Equality and Human Rights Commission, the Central Bank and the Financial Services and Pensions Ombudsman regarding the operation and enforcement of section 5 of the Equal Status Acts with respect to the provision and disposal of financial services; and if he will make a statement on the matter. [62367/21]

Written answers

Minister for Finance

I have not had correspondence with the Irish Human Rights and Equality Commission regarding the operation and enforcement of section 5 of the Equal Status Acts regarding the provision and disposal of financial services. Nor have I had correspondence with either the Central Bank or the Financial Services and Pension Ombudsman in relation to the issue.

The Deputy may wish to note that the Equal Status Acts 2000-2018, fall under the remit of my colleague, the Minister for Children, Equality, Disability, Integration and Youth.  On a general level, the Equal Status Acts prohibit certain kinds of discrimination in the provision of goods, facilities and services, obtaining or disposing of accommodation and in relation to educational establishments. The legislation protects against discrimination on nine specific grounds. With regard to financial services, the legislation also provides that people can be treated differently on any of the grounds (except gender) in relation to certain annuities, pensions, insurance policies or other matters related to the assessment of risk – but only where the differences are based on actuarial or statistical data or other relevant underwriting or commercial factors and are reasonable.  

Complaints regarding conduct prohibited under the Equal Status Acts should be referred to the Workplace Relations Commission, a body under the aegis of my colleague the Tánaiste and Minister for Enterprise, Trade and Employment.

Question No. 152 answered with Question No. 103.

Fuel Prices

Questions (153)

Richard Boyd Barrett

Question:

153. Deputy Richard Boyd Barrett asked the Minister for Finance if he is considering other measures within his remit notwithstanding the €100 grant being paid to every household towards energy costs in 2022 to offset the increases in energy prices; and if he will make a statement on the matter. [62404/21]

Written answers

Minister for Finance

The final retail price of fuel is determined by a number of factors which include the costs of production, distribution, global market factors, international exchange rates, taxation, wholesale market contracts as well as individual retail pricing policies.  The current spike in energy prices arises principally from the global recovery from the Covid-19 pandemic in conjunction with supply constraint issues and is being witnessed across the European Union as well as many other regions.

Wholesale electricity prices both in Ireland and across Europe have risen substantially in 2021, with high international gas prices, low levels of wind, increasing carbon prices (Emissions Trading System), a lingering 2020 winter, low gas storage reserves and gas supply issues in Europe all contributing to rising wholesale electricity prices.

As referenced by the Deputy, on Tuesday the Government approved the establishment of the Electricity Costs Emergency Benefit Scheme under which a payment of €100 will be made to each domestic electricity customer as a once off measure to mitigate the effects of the unprecedented rise in electricity prices on domestic electricity customers. 

Separately, with regard to home heating fuels and taxation, the Deputy will be aware that a reduced rate of VAT applies to all home heating fuels.    In relation to the Carbon Tax increase, I have delayed its application on home heating fuels until May 2022 to allow for the passage of the winter heating season.   In addition, in line with Government policy, the additional revenues raised from the increase in carbon tax have been allocated to expenditure measures which ensure a just transition through targeted social welfare measures, investment in energy efficiency and through funding for the agricultural sector. 

In light of the current upward trend in energy costs, an additional €174 million in carbon tax revenues is being made available to the Department of Social Protection in 2022, an increase of €105 million on the 2021 allocation of €69 million.  

This package of welfare measures is informed by ESRI research which finds that the net impact of the measures is progressive.   Analysis undertaken by the ESRI shows that as a result of this targeted policy approach, households in the bottom four income deciles will see all of the cost of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures. This is a tangible demonstration of the Government’s commitment to achieving a Just Transition.

I would like to remind people that there are still very significant savings to be had by shopping around energy suppliers.    I would also note that the most effective way to reduce a household’s energy bills permanently is through improving the energy efficiency of their home. The Government is providing a record level of support for energy efficiency this year. This will continue in 2022 with further investment.

In the long run, the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them. We will achieve this through the progressive decarbonisation of Irish society and through the steps that will be taken to meet the Government’s commitment to reach net zero greenhouse gas emissions by 2050.

Financial Services

Questions (154)

Richard Bruton

Question:

154. Deputy Richard Bruton asked the Minister for Finance if he is satisfied that the level of consumer switching in financial services indicates that consumers are taking advantage of opportunities to get better value; and if he plans changes in the standards of consumer advice, consumer information and consumer protection in the area in order to achieve better outcomes for consumers. [62248/21]

Written answers

Minister for Finance

I would encourage all consumers to shop around for financial products and services and to compare the benefits of the different products available. I would draw the Deputy’s attention to the work of Competition and Consumer Protection Commission (CCPC) in this regard. The CCPC is the statutory body responsible for promoting compliance with, and enforcing, competition and consumer protection law in Ireland. It provides a number of very useful online comparison tools for various financial products on its consumer website to help consumers manage their money.  

The Central Bank has also conducted research and brought forward regulation in recent years to ensure lenders are not putting impediments in place to prevent switching.

In 2016 the Central Bank of Ireland issued a Code of Conduct on the Switching of Payment Accounts with Payment Service Providers (the Switching Code). All banks, payment institutions and e-money institutions that offer payment accounts in Ireland must comply with the Code. The Switching Code is designed to ensure switching accounts is easy straightforward for the consumer.

The Central Bank continues to analyse key trends in relation to switching. In 2019, it released a Consumer Protection Bulletin which analyses the level of current account switching using data gathered from credit institutions and provides a high-level overview of the number and value of current accounts held by personal consumers, the number of consumers using the Switching Code and the number of consumer complaints received by firms in relation to current accounts.

Separately, in relation to mortgage switching the Central Bank produced an Addendum to its Consumer Protection Code in relation to mortgage switching in June 2018, following a public consultation process.

My Department, for its part, has also been doing considerable work to encourage consumer switching. Following on from the successful delivery of two advertising campaigns which promoted awareness on the benefits of switching, the Department of Finance is now working on the third phase of the Switch your bank campaign. This phase seeks to identify and develop tools which will better enable consumers to complete their switches and the Economic and Social Research Institute’s (ESRI) Behavioural Research Unit has been contracted to carry out an experimental research project that will focus on the behavioural aspects of switching.

The campaign will continue to be supported by a dedicated website, www.switchyourbank.ie/ which provides a single source where consumers can access useful facts about switching, including a straightforward step by step guide, links to Competition and Consumer Protection Commission (CCPC) comparison tools and helpful information to support their decision-making.

Question No. 155 answered with Question No. 139.

Inflation Rate

Questions (156)

Bernard Durkan

Question:

156. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains confident that inflationary forces remain within the manageability of the economy; if indicators exist that such inflationary tendencies are likely to level off as predicted; and if he will make a statement on the matter. [62303/21]

Written answers

Minister for Finance

The annual rate of consumer price (HICP) inflation rose to 5.4 per cent in November – the highest rate in more than two decades. The emergence of inflationary pressures in recent months is not unique to Ireland however, with inflation hitting multi-decade highs of 6.8 and 4.9 per cent in the US and euro area respectively in November.

The recent increase in inflation is partly explained by global factors, which are expected to ease over time. These include ‘base effects’ associated with the ‘normalisation’ of oil prices following their collapse last spring, the recent rise in wholesale energy prices and the imbalance between supply and demand that has emerged following the re-opening of the economy. This has been compounded by global supply chain disruptions, including transport bottlenecks, input shortages (e.g. semi-conductors) as well as labour supply shortages in some sectors.

At the time of the Budget, the Department forecast inflation of 2¼ per cent for this year and next year. Despite the strong pick-up in the rate of inflation in recent months, the rate for 2021 as a whole is likely to be close to the Department’s projection. However, the recent spike in wholesale energy prices means there is likely to be upside to the projection for next year. Nevertheless, inflation is still expected to ease over the course of next year as some of these factors fade, demand stabilises and supply catches up. However, the possibility of persistently higher inflation cannot be ruled out. Additionally, the recent emergence of the Omicron variant means there is now greater uncertainty about the inflation outlook.

Needless to say, significantly higher inflation next year would have significant impacts on the wider economy and public finances. At the household level real incomes could be squeezed, while at the firm level higher input costs would affect competitiveness. Meanwhile persistently higher inflation could trigger higher interest rates (including a policy response by the ECB), which would have implications for Government financing costs as well as for mortgage interest costs. In light of these risks, my Department will continue to closely monitor and analyse inflationary developments over the coming months.

Exchequer Returns

Questions (157)

Aindrias Moynihan

Question:

157. Deputy Aindrias Moynihan asked the Minister for Finance the measures he sees as appropriate to address the cost of living with rising inflation; and if he will make a statement on the matter. [62315/21]

Written answers

Minister for Finance

The annual rate of consumer price (HICP) inflation rose to 5.4 per cent in November – the highest rate in over two decades. Inflationary pressures are not unique to Ireland however, with multi-decade high inflation rates of 6.8 and 4.9 per cent recorded in the US and euro area in November. However, this comes after years of inflation of around 1 per cent, with the price level in Ireland still well below the level it would have been had the inflation rate been in line with the ECB price stability target of 2 per cent over the last two decades.

The recent rise in inflation is partly explained by global factors, which are expected to ease over time, including oil price ‘base effects’, global supply chain disruptions and the imbalance between supply and demand that has emerged following re-opening. More recently, rising wholesale energy prices have added to inflationary pressures, with energy inflation of 28 per cent recorded in November. However, futures markets point to an easing in energy inflation next year.

At the time of the Budget, my Department forecast headline inflation of 2¼ per cent for this year and next, however, the recent rise in wholesale energy prices means there is likely to be upside to the projection for next year. Nevertheless, inflation is expected to ease over the course of next year as these factors fade, demand stabilises and supply catches up. However, the possibility of persistently higher inflation cannot be ruled out.

The Government is however, very conscious of the impact of current inflationary pressures and introduced a range of measures in Budget 2022 to protect households against increases in the cost of living. These include a personal income tax package worth €520m and a social welfare package of over €550m. The fuel allowance was increased by €5 per week to compensate lower-income households for higher energy costs as a result of the increase in the carbon tax. There were also increases in the allocation of Early Learning Care and School-Age Childcare to ensure childcare prices do not rise. Nonetheless, my Department will continue to monitor inflationary developments closely and respond as appropriate.

Question No. 158 answered with Question No. 143.

Question No. 159 answered with Question No. 113.

Exchequer Returns

Questions (160)

Gerald Nash

Question:

160. Deputy Ged Nash asked the Minister for Finance his views on the recent comments by a person (details supplied) with regard to the potential for increased revenue to the Exchequer due to the planned increase in the minimum corporation tax rate from 12.5% to 15%; his plans to undertake an updated analysis on the impacts of a new minimum rate of 15%; and if he will make a statement on the matter. [62145/21]

Written answers

Minister for Finance

It is important to recognise that Ireland’s corporation tax rate of 12.5 per cent will remain for the vast majority of Irish businesses. The threshold that will apply to the 15 per cent minimum effective tax rate is €750 million annual global turnover. Thus, the vast majority of companies in Ireland - over 95 per cent - will not be subject to these new rules, and will continue to be subject to corporation tax at a headline rate of 12.5 per cent.

My Department and the Revenue Commissioners previously estimated that the cost of the OECD agreement on a new tax framework to address the tax challenges of digitalisation could be up to €2 billion annually when both pillars come into effect. However, as I have stated many times, this is an extremely challenging exercise, both in terms of timing and magnitude. Although there are two pillars to this Agreement, it is important to understand that they are intended as integral parts of a single agreed solution. How they interact and the degree to which this interaction influences business behaviour is very difficult to predict.

At a superficial level, the application of a minimum tax rate of 15 per cent under Pillar Two could provide some uplift to domestic corporation tax revenues. However, this would be a static assumption which does not take account of how firms react to a new tax regime, or to potential changes in tax regimes in other jurisdictions i.e. changes to the tax base. Further, any uplift on Pillar Two would be countered by the potential cost of Pillar One. That cost remains highly uncertain as its technical implementation is still far from resolved.

It should also be stressed that what we have now is a broad high level agreement on the main features of a solution. Discussions are continuing and will continue into 2022 on how the agreement will be implemented in practice. As technical discussions on the implementation framework continue, officials from my Department and from Revenue will keep the position under review and, when and if necessary, my Department will provide an update on how the agreement is expected to impact the public finances.

Question No. 161 answered with Question No. 127.

Covid-19 Pandemic Supports

Questions (162)

Pádraig O'Sullivan

Question:

162. Deputy Pádraig O'Sullivan asked the Minister for Finance if the CRSS refusal for a business (details supplied) will be reviewed; and if he will make a statement on the matter. [61738/21]

Written answers

Minister for Finance

The Covid Restrictions Support Scheme (CRSS) is provided for by Section 11 of the Finance Act 2020 and is available to companies, self-employed individuals and partnerships who carry on a trade or trading activities the profits of which are chargeable to tax under Case 1 of Schedule D. The trade must also be carried on from a business premises that is located in a region subject to Covid restrictions as set out in the relevant legislation, with the result that the business is required to prohibit or significantly restrict customers from accessing its premises.

I am advised by Revenue that the business in question is a Private Members Club, where gaming (within the meaning of the Gaming and Lotteries Act 1956) is carried on exclusively among members. While this business sector was initially restricted due to the pandemic, it was removed from the ‘restricted list’ with effect from 6 September 2021. As such, the sector, including the business in question, does not qualify for the CRSS from that date.

Revenue has also confirmed that the business received CRSS payments from 13 October 2020 to 5 September 2021 to which it was entitled. The business also received CRSS payments in respect of claims made after 5 September 2021 to which it was not entitled, resulting in an overpayment of which a small balance remains outstanding.

Finally, Revenue administers the CRSS in accordance with the legislation as set down by the Oireachtas. If the business considers that Revenue is incorrect in its interpretation of the law, it can make an appeal to the independent Tax Appeals Commission (TAC) in accordance with section 485(24) of the Taxes Consolidation Act 1997.

Financial Services

Questions (163)

Emer Higgins

Question:

163. Deputy Emer Higgins asked the Minister for Finance his views on the regulation of virtual currencies in Ireland; and if he will make a statement on the matter. [62087/21]

Written answers

Minister for Finance

My Department has been monitoring developments in virtual currencies, and blockchain in general, both in Ireland and globally for almost five years.

It has always been my intention that any regulation in this space would be adequate, proportionate and comprehensive without discouraging innovation.

Due to the global (or borderless) nature of virtual currencies, the potential threat to monetary sovereignty by virtual currencies like stablecoins, the speed of change and complexity in the technology, and its potential use for illicit transactions, the regulatory response must be a coordinated global effort.

Regulatory gaps in the treatment of virtual assets must be identified and addressed across jurisdictions.

This is why the G7’s 2019 statement – reiterated in 2020 – helped set private sector expectations and motivate coordinated public sector action towards common regulatory expectations.

In September 2020, the European Commission published the Digital Finance Package containing measures which aim to enable and support the development of digital finance while mitigating risks.

The Digital Finance Package includes:

1. Strategy on Retail Payments

2. Legislative proposal on a market in crypto-assets (known as the MICA regulation)

3. Legislative proposals on digital and operational resilience (known as the DORA regulation)

4. Legislative proposal on a pilot regime for market infrastructures based on distributed ledger technology (known as the DLT pilot).

In relation to the MICA regulation proposal and the DLT pilot, officials from the department actively engaged with the Council Working parties throughout 2020 and this year.

On 24 November 2021, the European Parliament announced that it had reached agreement with the Council on the DLT pilot scheme. The project follows the ‘sandbox’ approach, allowing for temporary derogations from certain requirements under the EU’s financial services legislation.

On MICA, the European Parliament is still reviewing the proposal. The Council reached general agreement under the Slovenian presidency in November. The expectation is that trilogues would commence next year under the French presidency.

In Ireland, the Central Bank issued warnings to consumers in 2017 and 2018, with the latest advice issued in April of 2021, on the risks of buying virtual currencies.

The warnings clearly state that virtual currencies such as Bitcoin and Ether have no legal tender status to be used as means of payment, and are not guaranteed or regulated by the Central Bank of Ireland, or any other central bank in the EU.

As of 23 April 2021, the providers of certain services in relation to virtual assets must meet anti-money laundering and countering of financing of terrorism (AML/CFT) obligations, under part 4 of the CJA 2010 to 2021. 

All VASPs (virtual asset service providers) established in Ireland are required to register with the Central Bank for these AML/CFT purposes.

Finally, the Competition and Consumer Protection Commission also updated their advice on purchasing and investing in digital and cryptocurrencies during June of this year, clearly outlining the risks.

Question No. 164 answered with Question No. 95.

Question No. 165 answered with Question No. 127.

Credit Unions

Questions (166)

Jennifer Murnane O'Connor

Question:

166. Deputy Jennifer Murnane O'Connor asked the Minister for Finance if he will report on the meetings he has held with credit unions and bodies over the past six months. [62220/21]

Written answers

Minister for Finance

Since June, Minister of State Fleming who has responsibility for credit unions, has held seventeen meetings with various credit union stakeholders including the Representative Bodies, various collaborative ventures, the Registrar of Credit Unions, the Credit Union Advisory Committee and individual credit unions. These meetings have proven to be very informative and their outputs will feed into the Review of the Credit Union Policy Framework.

Separately, Department Officials from the Credit Union Policy Team have very regular engagement with sector stakeholders, including quarterly stakeholder roundtables, the most recent of which took place in December.  They also act as secretariat to the Credit Union Advisory Committee, which meets on a monthly basis. 

Question No. 167 answered with Question No. 127.

Credit Availability

Questions (168)

Rose Conway-Walsh

Question:

168. Deputy Rose Conway-Walsh asked the Minister for Finance the percentage of the 2% of primary home mortgages that are provided without the requirement for mortgage protection insurance that were given an exemption either specifically due to suffering from an eating disorder or under the exemption of section 126 of Consumer Credit Act 1995 given that this is the only exemption that could cover a mortgage applicant with an eating disorder; and if he will make a statement on the matter. [62349/21]

Written answers

Minister for Finance

As referred to in my previous answer of 16 November last, it was estimated that on an annual basis only 0.05% of mortgage applications were refused due to the fact that the applicant did not put in place an acceptable policy of mortgage insurance and that on an annual basis around 2% of primary home mortgages were provided without the requirement for mortgage protection insurance. My Department does not have any additional or more detailed information on this specific data.

However, more generally the Banking and Payments Federation of Ireland (BPFI) has indicated that financial institutions always seek to ensure the right outcome for the customer by taking all aspects of the specific mortgage application into consideration and, in reviewing any case where an exemption to the requirement to arrange mortgage protection insurance is sought, lenders will engage closely with each customer on a case-by-case basis to understand the credit and other risks which may arise in each individual case. Of most concern in such cases is understanding if any surviving party to the mortgage would have the ability to repay the facility in the event of the death of the uninsured party. There are situations where it is deemed in the customer’s best interest to waive the requirement and others where it is deemed not to be in the customer’s best interest to waive the requirement for mortgage protection. This is likely to be particularly relevant where the mortgage is on the family home or the primary residence of the customer. Also it should be noted that, as customers typically arrange mortgage protection insurance through a third-party insurance company, lenders are often unaware of the specific reasons why the third-party insurance company has declined mortgage protection cover and therefore this is not a factor included in consideration when deciding on a waiver request.  

Nevertheless, it should also be noted that if any person is not satisfied with the way a regulated mortgage provider or insurance provider has dealt with them in relation to an application for a mortgage or mortgage protection insurance, the consumer can complain directly to the regulated entity. If they are not satisfied with the response from the regulated entity, the response to their complaint from the regulated entity is required to include details for the borrower on how to refer their complaint to the Financial Services and Pensions Ombudsman who, if a valid complaint is made, will independently consider the matter. 

Customs and Excise

Questions (169)

Verona Murphy

Question:

169. Deputy Verona Murphy asked the Minister for Finance the proactive and immediate steps his Department is taking to address the excessive duty on HVO oil; and if he will make a statement on the matter. [62292/21]

Written answers

Minister for Finance

I understand that the Deputy is asking about the excise duty on hydrogenated vegetable oil used as motor or heating fuel.

The Finance Act 1999 provides for the application of an excise duty to specified mineral oils, such as petrol, diesel, and kerosene, that are used as motor or heating fuels; this excise duty is called Mineral Oil Tax (MOT) and comprises a carbon and a non-carbon component. Section 96(2A) of Finance Act 1999 provides that “substitute fuels” are also subject to MOT; substitute fuels are liquid products, other than mineral oils, that are used as motor or heating fuels. Under the Act, a substitute fuel is taxed at the MOT rate of the mineral oil in whose place it is used. For example, a substitute fuel used in place of diesel in a motor vehicle would be taxed at the MOT rate for auto-diesel, currently €535.46 per 1,000 litres, which comprises carbon and non-carbon components of €109.74 and €425.72 per 1,000 litres respectively.

MOT law provides for a relief from the carbon component of MOT for biofuels that are made of biomass of animal or vegetal origin. This means that a substitute fuel that is entirely made from biomass would be liable for the non-carbon component of MOT only. In the case of such a biofuel used in place of diesel, the MOT carbon component of €109.74 per 1,000 litres would be fully relieved and the applicable MOT rate would be €425.72 per 1,000 litres. For blended fuels containing biomass, the relief applies to the portion of fuel that meets the biofuel criteria set out in MOT legislation. The biofuel relief is intended to promote a higher level of biofuel in conventional transport fuel sales and supports Government’s commitment to incentivising the use of greener alternatives to fossil fuels.

Because the carbon component of MOT is already fully relieved for biofuels, these types of fuels are not impacted by the ten-year trajectory of carbon tax increases which I introduced in Finance Act 2020. This means that, as annual increases in the carbon component of MOT are implemented, the differential in tax costs between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.

Finally, the Deputy may also wish to note that I introduced a Report Stage amendment to the Finance Bill 2021 so as to provide for a temporary reduction in the non-carbon component of MOT with effect from 1 April next year until Budget Day 2022. I have taken this step to partially offset the expected increase in fuel costs arising from an increase in the Biofuel Obligation for transport fuels proposed by my colleague the Minister for Transport. The reduction in MOT of 1 cent per litre (inclusive of VAT) will be matched by a reduction in the National Oil Reserves Agency levy, which together will offset the estimated impact of the biofuels increase on the retail price of auto fuels.