Dáil Éireann Debate, Tuesday - 15 February 2022
273. Deputy Brendan Griffin asked the Minister for Finance if he will consider an adjustable qualifier to apply to excise duty on units of fuel to provide for a maximum and minimum unit prices as a measure to mitigate against the socio-economic impacts of peaks and troughs in global oil prices; and if he will make a statement on the matter. [7426/22]
View answerIreland’s taxation of fuel is based on European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. Ireland applies excise duty, in the form of Mineral Oil Tax (MOT), to fuels used for motor or heating purposes.
MOT is comprised of a non-carbon and a carbon component; the carbon component is also referred to as carbon tax. The Deputy will be aware that the 2020 Programme for Government committed to increasing the amount that is charged per tonne of CO2 emissions from fuels to €100 by 2030. I followed through on this commitment by introducing legislation in Finance Act 2020 to provide for a 10-year trajectory for carbon tax increases to reach €100 per tonne of CO2 by 2030. This measure is a key pillar underpinning the Government’s Climate Action Plan to halve emissions by 2030 and reach net zero no later than 2050.
It is important to note that a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society but also in the long term, provides support against fuel price impacts by reducing our reliance on fossil fuels.
Of course, the Government is acutely aware of the increase in consumer prices in recent months, especially the increase in fuel and other energy prices and for this reason we designed a package of measures to alleviate the impact of increased energy prices on households.
The package of measures includes:
- an increase in the energy credit to €200 including VAT, estimated to impact just over 2 million households (to be paid in April)
- a lump sum payment of €125 on the fuel allowance will be paid in early March to 390,000 recipients
- to reduce the burden on people returning to the workplace and people using public transport, there will be a temporary reduction in fares of 20% from the end of April to the end of the year. This will impact approximately 800,000 daily users
- the original Sláintecare report proposed a reduction of the Drug Payment Scheme from €144 to €100. The government has decided to reduce this further to €80. This will benefit just over 70,000 families
- the working family payment budget increase announced on Budget Day will be brought forward from 1 June to 1 April
- reduced caps for multiple children on school transport fees to €500 per family post primary and €150 for primary school children
In designing a support package, the Government was conscious of the need to target the main underlying problem – higher energy prices – while operating within the fiscal framework set out in the Summer Economic Statement. The suite of measures was announced last week and strikes the appropriate balance. This package provides support to every household via the electricity credit but also provides specific supports for more vulnerable households through targeted welfare measures.
The Deputy will be aware that tax registered businesses are eligible to apply for a refund on the tax paid for fuels used in the course of business. Additionally, the Diesel Rebate Scheme (DRS) allows qualifying road haulage and transport operators to claim a partial repayment of MOT on their transport fuels when the pump price of diesel goes above €1.23 per litre. The DRS was amended in 2019 to increase the rate of rebate and it continues to be an important support to the road transport sector.
The Deputy’s suggestion of introducing an adjustable qualifier to result in variable MOT rates dependant on market fluctuations would undermine the tax policy initiatives that I have implemented to support delivery of critical emissions reductions strategies, including the allocation of expenditure for the Just Transition. It is also a broad based measure which would not provide targeted support to those households most vulnerable to fuel poverty. I am satisfied that the package of measures announced last week, in addition to the support measures announced in Budget 2022, is the most effective means of reducing the impact of inflationary trends on households.
On a general point regarding the Deputy’s proposal, I am advised by Revenue that administering fluctuating tax rates would be extremely challenging and likely to result in considerable additional administrative burden for taxpayers and for Revenue. The introduction of such complexity and relative uncertainty would be very inconsistent with best practice in tax policy and administration.
For the reasons I have outlined above, I do not intend to implement the measure suggested by the Deputy.
