Dáil Éireann Debate, Tuesday - 29 March 2022
273. Deputy Darren O'Rourke asked the Minister for Finance if he has examined expanding the diesel rebate scheme to include other fuels such as compressed natural gas; and if he will make a statement on the matter. [16464/22]
View answer274. Deputy Darren O'Rourke asked the Minister for Finance the estimated cost of including compressed natural gas in the diesel rebate scheme; and if he will make a statement on the matter. [16465/22]
View answer275. Deputy Darren O'Rourke asked the Minister for Finance if he intends to reform the diesel rebate scheme to make it more accessible (details supplied); and if he will make a statement on the matter. [16466/22]
View answer276. Deputy Darren O'Rourke asked the Minister for Finance the cost of the diesel rebate scheme in 2018, 2019, 2020 and 2021; and if he will make a statement on the matter. [16467/22]
View answer277. Deputy Darren O'Rourke asked the Minister for Finance the estimated cost of increasing the rate of the diesel rebate scheme from 7.5 cent to €0.15, to €0.20 and €0.25; and if he will make a statement on the matter. [16572/22]
View answerI propose to take Questions Nos. 273 to 277, inclusive, together.
Ireland’s taxation of fuel is governed by 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. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended) and this Act provides for the application of excise duty, in the form of Mineral Oil Tax (MOT), to specified mineral oils that are used as motor or heating fuels. MOT is comprised of a non-carbon component and a carbon component. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as “excise”, “fuel excise” or “fuel duty”. It is important to note that both components of MOT are excise. Total MOT rates are what are considered in terms of compliance with ETD minimum rates.
The Diesel Rebate Scheme (DRS) was introduced in 2013 with the aim of providing support to road haulage and bus transport operators when the retail price of auto diesel is relatively high. The DRS operates as a State Aid under Commission Regulation (EU) No 651/2014, commonly referred to as the General Block Exemption Regulation. The DRS allows qualifying operators to benefit from an effective lower rate of MOT than other auto-diesel users. While this application of a differentiated MOT rate on auto-diesel for certain commercial uses is allowed under Articles 7.2 and 7.3 of the ETD, the ETD minimum rate, currently €330 per 1,000 litres, must still be complied with. This means that the effective MOT rate is what is considered in terms of compliance with ETD minimum. The effective MOT rate is determined by reducing the actual MOT rate by the maximum DRS repayment rate.
The DRS is provided for in section 99A of Finance Act 1999 and operates on a sliding scale basis, whereby a partial rebate of MOT is available when the retail price of a litre of diesel exceeds €1.00 excluding VAT. The repayment rate increases gradually as the retail price increases, up to a maximum repayment rate of 7.5 cents per litre. Budget 2020 introduced enhancements to the DRS, whereby the marginal rate of repayment was increased from 30% to 60% at prices over €1.07 per litre excluding VAT (€1.32 incl. VAT). The rate of repayment is currently capped at 7.5 cents per litre. This cap is reached when the average price of diesel, excluding VAT, is €1.16 or more per litre (€1.43 incl. VAT).
The Deputy will be aware that in response to the current fuel crisis I recently introduced a reduction of 15 cents inclusive of VAT to the auto-diesel MOT rate effective from 10 March through to the end of August. This is in addition to the temporary reduction of 1 cent per litre inclusive of VAT which was provided for in Finance Act 2021 to partially offset expected rises in biofuel costs. This MOT cut will come into effect on 1 April and run until 11 October this year. These rate changes are summarised in the table below, along with comparisons between actual and effective MOT rates and the ETD minimum rate.
|
Auto-diesel rates/1,000L from |
MOT non-carbon |
MOT carbon |
Total MOT |
Effective MOT incl. DRS |
ETD minimum |
MOT rate > ETD min. by |
Effective MOT > ETD min. by |
|
13-Oct-21 |
€425.72 |
€109.74 |
€535.46 |
€460.46 |
€330.00 |
€205.46 |
€130.46 |
|
10-Mar-22 |
€303.77 |
€109.74 |
€413.51 |
€338.51 |
€330.00 |
€83.51 |
€8.51 |
|
01-Apr-22 |
€295.64 |
€109.74 |
€405.38 |
€330.38 |
€330.00 |
€75.38 |
€0.38 |
|
01-Sep-22 |
€417.59 |
€109.74 |
€527.33 |
€452.33 |
€330.00 |
€197.33 |
€122.33 |
|
12-Oct-22 |
€425.72 |
€129.81 |
€555.53 |
€480.53 |
€330.00 |
€225.53 |
€150.53 |
As already mentioned, the maximum MOT repayment rate under the DRS is currently 7.5 cents per litre, or €75.00 per 1,000 litres. This means that the current effective MOT rate on auto-diesel is only marginally above the ETD minimum by €8.51 per 1,000 litres or 0.85 cents per litre. From 1 April until 1 September 2022 the difference between the effective MOT rate and the ETD minimum will be even less; €0.38 per 1,000 litres or 0.038 cents per litre. The Deputy will appreciate that an increase of 0.038 cents per litre in the DRS repayment rate would be negligible. Any increase beyond 0.038 cents per litre during the period from 1 April to 1 September would be incompatible with EU law.
Regarding the costs of increasing the DRS repayment rate from 7.5 cents to 15, 20 and 25 cents, as already outlined any material increase in the repayment rate is currently not permissible under the ETD. I am advised by the Revenue Commissioners that, if repayment rates of 15, 20 and 25 cents were permissible, it is estimated that the additional costs to the end of 2022 would be in the region of €30m, €50m and €70m respectively providing a total cost of €60m, €80m and €100m respectively for a full year. These estimates are based on the most recently available data and assume the average price of auto-diesel remains above €1.16 per litre excl. VAT (€1.43 incl. VAT).
The Revenue Commissioners advise that the provisional cost for the Diesel Rebate scheme for 2021 is estimated at €9.7m and costs for the years 2018 to 2020 are published on the Revenue website at the following link:
www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/costs-tax-expenditures.pdf
The Deputy has asked if consideration has been given to expanding the DRS to include other fuels such as compressed natural gas. Natural gas used as a propellant is subject to MOT and is referred to in legislation as vehicle gas. The current MOT rate on vehicle gas is €9.36 per megawatt hour. This rate has been in place since its introduction in 2017 and is legislated to remain in place until May 2024. Under the ETD, the minimum rate of taxation required on propellant natural gas is €9.36 per megawatt hour. Therefore, there is no scope to extend the DRS to include vehicle gas. In any event vehicle gas, unlike auto-diesel, is not covered by ETD provisions that allow for differentiated rates of taxation for commercial purposes.
The availability of the DRS is widely known across the sector. I am advised by the Revenue Commissioners that the number of operators registered for the DRS over the last four years are given in the table below along with the number of new registrations each year.
|
Year |
DRS Registrations |
New DRS Registrations |
|
2018 |
2,490 |
119 |
|
2019 |
2,581 |
93 |
|
2020 |
2,653 |
72 |
|
2021 |
2,901 |
249 |
I am further advised that the DRS is operated through Revenue Online Systems (ROS) and comprehensive details are published on Revenue’s website, including how to register and claim online, qualifying criteria and repayment rates. Under the DRS a repayment may only be made to licensed road haulage and bus transport operators who purchase diesel in the State for use, in the course of their business, in qualifying motor vehicles. Qualifying road haulage vehicles include those with a maximum permissible gross laden weight of not less than 7.5 tonnes. Qualifying passenger transport vehicles include category M2 and M3 vehicles.
When registering, applicants must provide a copy of the relevant licence and either a valid Tax Clearance Certificate issued by Revenue or written proof of tax compliance in the form of a letter from the tax authority of another Member State where the operator’s road licence was issued. Claims may only be made for auto-diesel purchased in the State in bulk (2,000 litres or more), or by using a fuel card approved by Revenue. Revenue may request supporting evidence to verify that the auto-diesel was dispensed to and used in a qualifying vehicle.
Uptake of the scheme by qualifying operators (appropriately licensed, tax cleared and using auto diesel in qualifying vehicles) is clearly driven by fuel prices. The final quarter of last year saw fuel prices rise to a point where the DRS hit the maximum repayment rate of 7.5 cents per litre. Some registered have not made claims over the past two years despite rising fuel prices, which may be partly explained by a downturn in business during the Covid-19 pandemic. I understand that Revenue is currently engaged in contacting registered operators who have not recently submitted DRS claims to remind them of the availability of the scheme. In this regard, 243 letters issued to operators in late 2021 and a further approximate 1,100 will issue in the coming weeks.
Finally, I must point out that the European Commission’s proposal for the revision of the ETD envisage the removal of some tax exemptions, reliefs and reduced rates that essentially act as fossil fuel subsidies. The ETD proposals are a key pillar of the Commission’s Fit for 55 legislative package which is aimed at reducing net greenhouse gas emissions by at least 55% by 2030.
