Dáil Éireann Debate, Tuesday - 26 April 2022
1865. Deputy Carol Nolan asked the Minister for Agriculture, Food and the Marine the supports that he is providing to farm contractors to offset the increasing cost of agri-diesel; and if he will make a statement on the matter. [19540/22]
View answerWhile primary responsibility for taxation policy is with the Minister for Finance, I continue to work closely with him to ensure that the tax code reflects the Government’s priorities for the agri-food sector and the economy generally.
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). Finance Act 1999 provides for the application of excise duty, in the form of Mineral Oil Tax (MOT), to specified mineral oils, such as petrol, diesel and Marked Gas Oil (MGO) that are used as motor or heating fuels. Gas oil that qualifies for a reduced rate of MOT is marked green and is usually referred to as MGO, green diesel or agricultural diesel.
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”. The current rate of MOT on MGO is €120.55 per 1000 Litres. This compares very favourably to the current rate applied to auto diesel which is €405.38 per 1000 Litres.
The Minister for Finance reduced the rate on MGO by 2 cents per litre inclusive of VAT from 10 March. This reduction brought the rate from €138.17 per 1000 Litres to the current rate of €120.55 per 1000 Litres. Effective from 1 May 2022 a further VAT inclusive 3 cent reduction for MGO will apply, bringing the overall rate of MOT to €111.14 per 1000 Litres. This reduced rate fully offsets the 1 May 2022 increase in the carbon tax and will apply until 11 October 2022.
A Financial Resolution will be brought to the Dáil after the Easter recess to give effect to these changes and provide the legislative basis by way of an amendment to the Finance (Covid Miscellaneous) Bill 2022 currently before the Dáil.
Those who incur expenses in relation to farm diesel in the course of farming or the trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.
I would also note that Section 664A of the Taxes Consolidation Act 1997 provides further relief on expenditure incurred by farmers in respect of an increase in the carbon tax on farm diesel. It is an additional tax measure for farmers introduced in Budget 2012 which compensates increases in the carbon tax from the 2012 base rate of €15 per tonne of CO2 emission. This measure means that a farmer may take an income tax or corporation tax deduction for farm diesel (including any carbon tax charged in respect of the diesel) and then a further deduction for farm diesel which is equal to the difference between the carbon tax charged and the carbon tax that would have been charged had it been calculated at the rate of €41.30 per 1,000 litres of farm diesel (the 2012 baseline).
My colleagues across Government and I continue monitor the situation closely.
