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Fuel Prices

Dáil Éireann Debate, Tuesday - 26 April 2022

Tuesday, 26 April 2022

Questions (493, 494, 496, 522, 529)

Claire Kerrane

Question:

493. Deputy Claire Kerrane asked the Minister for Finance if he will meet with an association (details supplied) to engage with them on issues impacting on the viability of their sector relating to carbon tax on marked gas oil green agri diesel to ensure that grass silage and tillage can be saved this summer; and if he will make a statement on the matter. [19950/22]

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Claire Kerrane

Question:

494. Deputy Claire Kerrane asked the Minister for Finance if he will consider removing carbon tax from marked gas oil supplied to the farm and forestry contractor sector; and if he will make a statement on the matter. [19951/22]

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Michael Healy-Rae

Question:

496. Deputy Michael Healy-Rae asked the Minister for Finance if he will remove the carbon tax from the marked gas oil supplied to the farm and forestry contractors sector; and if he will make a statement on the matter. [20048/22]

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Colm Burke

Question:

522. Deputy Colm Burke asked the Minister for Finance if consideration will be given to the removal of carbon tax from marked oil gas used in agriculture and forestry by farm and forestry contractors for a period of five years in order to reduce costs and to allow adequate time for the international machine development and supply sector to provide alternatives to internal combustion engines in the form of market ready zero carbon systems that will meet the lower carbon climate objectives as set out in the National Climate Action Plan; and if he will make a statement on the matter. [20660/22]

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Colm Burke

Question:

529. Deputy Colm Burke asked the Minister for Finance if consideration will be given to giving relief on green diesel particularly with forage harvesting crops in May, June, July and August; and if he will make a statement on the matter. [20964/22]

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Written answers

I propose to take Questions Nos. 493, 494, 496, 522 and 529 together.

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 kerosene, that are used as motor or heating fuels. MOT is comprised of a non-carbon component and a carbon component. The carbon component is proportionate to the carbon dioxide emissions of the fuel concerned and is commonly referred to as carbon tax. The non-carbon component is often referred to as “excise”, “fuel excise” or “fuel duty”.

The Deputies will be aware that the 2020 Programme for Government committed to increasing the amount that is charged per tonne of carbon dioxide 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 carbon dioxide 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. Carbon tax increases are scheduled to apply to petrol and diesel on Budget night and on all other mineral oils on 1 May each year to 2030.

Diesel used for certain purposes, for example in agricultural machinery, may qualify for a reduced rate of MOT. Such diesel must be marked with prescribed fiscal markers and is referred to as Marked Gas Oil (MGO), green diesel or farm/agricultural diesel. The current reduced rate of MOT that applies to MGO is €120.55 per 1,000 litres. This is considerably less than the standard rate of MOT on diesel used as a propellant which is currently €405.38 per 1,000 litres.

In March this year, in response to the global fuel crisis, I introduced cuts to MOT rates on petrol, diesel and MGO. I intend to introduce a further cut to the MOT rate on MGO from 1 May to run until 11 October this year. This rate cut will be applied to the non-carbon component of MOT to fully compensate for a scheduled increase in the carbon component. The rate of MOT on MGO will be almost 30% lower from 1 May than the rate that would have applied had I not provided for relevant cuts. As a result of the measures I introduced, all MGO users will benefit from a cut of more than 5 cents per litre inclusive of VAT from 1 May until 11 October. The table below provides the current MOT rate, broken into its carbon and non-carbon components, along with the pre-cut rate and the rate to apply when the temporary reduction period ends.

MOT rate on MGO from

MOT non-carbon

MOT carbon

Total MOT

01-May-21

€47.36

€90.81

€138.17

10-Mar-22

€29.74

€90.81

€120.55

01-May-22

€0.00

€111.14

€111.14

12-Oct-22

€47.36

€111.14

€158.50

In addition to benefiting from the enhanced, reduced MOT rate on MGO (farm/green diesel), farmers and agricultural/forestry contractors may also claim a tax deduction for expenditure incurred on MGO (including any MOT charged) in computing their taxable profits. In computing their taxable farming profits, farmers may also benefit from a relief provided under Section 664A of the Taxes Consolidation Act 1997. This relief allows a farmer to claim an additional deduction for MGO which amounts 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).

The relief under section 664A is available to any person carrying on a trade of farming in the State. Agricultural/forestry contractors are not entitled to this relief as they are not carrying on a trade of farming which, as defined in section 654 of the Taxes Consolidation Act 1997, requires the occupation of farmland. However, as outlined above, such contractors may claim tax deduction for expenditure incurred on fuel costs when calculating their taxable profits.

It is also worth mentioning that 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 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 MGO, the MOT carbon component would be fully relieved. 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 fuel sales and supports Government’s commitment to incentivising the use of greener alternatives to fossil fuels.

Finally, if the Association of Farm and Forestry Contractors wish to meet me or my officials they should submit a request to my private office.

Question No. 494 answered with Question No. 493.
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