Dáil Éireann díospóireacht -
Thursday, 5 Feb 2015

Vol. 866 No. 3

Customs Bill 2014: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

Deputy Tony McLoughlin

The main benefit of this new Customs Bill will be, in theory at least, that it will strengthen the overall role of Customs and Excise, as it will give its officers more powers to stop, seize and prosecute criminals who openly choose to break our laws for their personal gain. For example, section 6 of the Bill, will be a welcome tool in the arsenal of customs officials, as it will provide for the appointment of any place in the State as a customs port or airport for the arrival and departure of vessels into and out of the State. This will ultimately mean greater scrutiny of cargo and personal belongings in areas other than the main airports and shipping ports of this country.

As the House is aware, in recent times there have been reports that obscure beaches and small airfields are open to serious abuse by drug and criminal gangs. For example, along the large coastline of County Sligo, there have been numerous reports of speedboat activity occurring in the middle of the night along some of the most obscure beaches. I dread to think what is occurring in these instances. As I have mentioned on previous occasions, smuggling and related activities are rampant and their effects are apparent in my constituency of Sligo–Leitrim. Hopefully, this new Customs Bill will lead to an increase in efforts by Customs and Excise, Revenue and An Garda Síochána to combat offences and ultimately result in more criminal convictions, more fines being issued and the removal of illegal and unsafe products from our streets.

I would like to mention briefly the effects the smuggling of tobacco is having on retailers, such as those I met recently from Sligo. They are calling on us as a Legislature to control the sale of tobacco in this country. Retailers are governed by our laws on the conditions of the sale of tobacco and therefore must charge €10 per packet for 20 cigarettes. This is a stark comparison to the fact that today the same quantity of cigarettes can be bought on the streets of Sligo, like many other towns, for just €3 per packet.

I do not need to elaborate here how this activity is affecting their business trade, at a time when revenues are already dwindling. Three small retailers closed in Sligo town just last week.

Not one red cent of this €3 will make its way back to the Exchequer, and in fact, it will more than likely be used by criminal organisations to further their criminality and increase their profits in this country and beyond. Just this week we have seen the extent to which these criminal gangs will go in order to evade both the Irish customs officials and their counterparts in the United Kingdom. The massive seizure of over €2 million worth of raw tobacco in a joint raid by Customs and Excise, the PSNI and An Garda Síochána shows the smugglers' intent and capabilities.

Another area where the Customs Bill will be beneficial is in the State's attempts to tackle the rise in the online purchasing of counterfeit goods from which the State receives no VAT. This practice is on the rise internationally, and greater co-operation between Irish customs and our international partners is needed to combat this trend. A number of retailers in my constituency have informed me that this practice is having a damaging effect on local retailers.

While I strongly support the contents of the Bill, I believe that fine of just €5,000, listed in a number of sections of this Bill, for a person convicted of an offence under customs law is too lenient and should be examined again. This fine needs to be higher, as it will not deter people from taking the chance of smuggling illegal or prohibited goods, both into and out of the State at its current level.

Along with this welcome modernised customs legislation, I also strongly believe the State needs to invest more funding in the resources available to Customs and Excise, in order to help further combat the threat our country faces from smugglers and criminal gangs.

I have stated before that an agency similar to the Criminal Assets Bureau should be established within Customs and Excise and the Garda solely to tackle the importation and distribution of illegal tobacco products. There needs to be an intelligence-led strategy with officers seconded to this unit from the Garda and Customs and Excise who will target the importers and distributors throughout the country. It will cost money but this funding can be obtained through a levy or tax on cigarettes, rather than directly from the Exchequer. However, it would need a proper budget and mandate to tackle the crime of tobacco smuggling, which is estimated to cost the taxpayer €450 million per year.

It is clear from the facts that we are not winning the battle with these criminal gangs and smugglers at present. More financial resources for Customs and Excise and the Garda are needed along with this new legislation. However, I welcome the legislation and I hope it will be beneficial to their efforts.

I pay tribute to and commend the work the Irish Customs and Excise service does in protecting our State. It is often a thankless job and it is important that their hard work and effort is recognised and commended while discussing this new and welcome customs legislation.

Deputy John Paul Phelan

I pick up where Deputy McLoughlin left off. I thank the Customs and Excise service and An Garda Síochána for their efforts in protecting our borders commercially. The Deputy pointed out that they may need more resources. I know there is a constant demand on Ministers for more resources. I will make that point later in my contribution.

We are dealing with legislation in the customs area that goes back to 1876, which is a long time ago. The importation of articles and material into the country has changed considerably in that 140 year period. I welcome the measures in the legislation which take account of the changes that have taken place in the intervening period, not least the effect of European Union regulation and law in this area. I know that is part of the Bill we are discussing and the Minister referred to it in his opening comments. I welcome that the Bill carries forward the existing customs appeals procedures.

Further to Deputy McLoughlin's contribution, my major focus is on the importation of illegal or counterfeit goods and other materials, principally tobacco and fuel. I am a member of a committee of the British-Irish Parliamentary Assembly that is investigating mainly fuel laundering and counterfeit importation in general. We have been presented with pretty strong evidence of such illegal activities that continue in the country. I appeal to the Minister of State on the issue of counterfeit cigarettes. I speak as somebody who from time to time socially avails of tobacco. Some people might say I have a vested interest. I can assure the House that my vested interest is in protecting people's health and protecting the taxpayer.

Many of these counterfeit cigarettes are of a particularly dangerous quality and standard. That goes above and beyond the obvious negative health effects smoking has on individuals. That is one factor to be taken into consideration. The other is the loss to the Exchequer, which is hard to quantify for sure. In my part of the world there is considerable anecdotal evidence of significant sales of counterfeit tobacco products. Representatives of those involved in the legal sale of tobacco have supplied me with evidence of particular activities that go on in some of our port towns and the surrounding hinterland. They report significant reductions in the sales of tobacco products at times when significant ships come into that port town. I know it is anecdotal evidence and it is hard to quantify it exactly. However, all these retail representatives tell me the same story.

Kilkenny is an unusual area in that it is an inland county with two ports - the Port of New Ross and the Port of Waterford. The Port of New Ross, partly, and the Port of Waterford, wholly, are located in County Kilkenny. Significant evidence has been presented to me of activities that coincide with the arrival of certain vessels from certain areas into those port facilities and the resultant decline in the sale of legal tobacco products in outlets in the immediate hinterlands of those ports. It is also obvious that certain individuals, who have no other obvious source of wealth or income, manage to live lifestyles that are incompatible with what their legal income might be determined to be because they are allegedly, at least, involved in these activities.

I know there has been investment in recent years in additional scanning facilities at our ports. There is at least one mobile scanning unit and there may be others. I ask the Minister of State to clarify that in his concluding remarks. More investment is needed in this area because it will have a knock-on beneficial effect for the Exchequer in terms of ensuring that the tobacco products sold here are legal.

In the area of fuel laundering, we are all familiar with people who have suffered as a result of using laundered fuel. This has happened across country, not least in my constituency. In the past five years, the proliferation of disused filling stations suddenly springing up and offering fuel at much lower prices than longer established fuel facilities rings alarm bells for most people. However, we cannot, nor should we, blame the public for shopping around and ensuring they get the best value for money when buying fuel. Some of the facilities sell illegal product. It is easy for a backbencher to seek extra resources but in this area it is self-financing. If extra expenditure is incurred in policing the activity within the economy, the knock-on benefits to the Exchequer in additional revenue from legally produced fuel will finance the venture. I encourage the Minister of State to ensure the funding is made available.

I welcome the legislation. It seems appropriate that a such a consolidation measure comes before the House. I ask the Minister of State to consider additional resources sought by me and Deputy Tony McLoughlin.

Minister of State at the Department of Finance (Deputy Simon Harris)

I am glad to have the opportunity to take part in the progressing of the Customs Bill through the House. As the Minister, Deputy Noonan, said in his opening remarks, most of the current national customs legislation is old and, in the main, consists of a body of pre-Independence legislation - the Customs Consolidation Act 1876 - which has been extensively adapted and amended on many occasions over almost 140 years. One consequence is that, while the provisions in the 1876 Act are still on the Statute Book, many of them are now either redundant or of doubtful validity. From a wider perspective, the complicated and overlapping structure of the resulting legislation can, at times, be difficult to follow and to understand.

The purpose of the new Customs Bill is to consolidate, revise and modernise Ireland's existing national customs legislation. The Bill will repeal the existing legislation and will provide a single, modern piece of national legislation in substitution. The new legislation is more in keeping with the developments in trade and in technology over the years and better reflects the current social and political mores.

This legislative approach is at the core of the wider Better Regulation initiative. It will provide greater clarity and transparency and, in so doing, it will make it much easier to access the national customs legislation. This, ultimately, has the potential to reduce the administrative burden and red tape often perceived to be involved in complying with customs legislation and requirements. The Minister, Deputy Noonan, referenced the scale and context of the customs operation in modern-day Ireland that necessitated the modernisation of the underlying national legislation. Approximately 1.1 million customs declarations are made per annum, made up of roughly 600,000 declarations in respect of imports and 550,000 in respect of exports. Some €270 million in customs duty was collected last year.

A number of Deputies raised the issue of fuel laundering and petrol stretching. The Revenue offences attaching to these practices and the powers of Revenue officials relating to detection and prosecution of those involved are dealt with in excise law, principally the Finance Acts. Having said this, significant additional powers have been made available to tackle these issues. A comprehensive strategy to tackle illegal diesel laundering has been put in place, including the licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability of criminals to get laundered fuel onto the market. It also includes a new licensing regime for marked fuel traders, introduced in October 2012, which is designed to limit the ability of criminals to source marked fuel for laundering, and new requirements on fuel traders' records of stock movements and fuel deliveries were introduced to ensure data are available to assist in supply chain analysis. Also, following a significant investment in the required IT systems, a new supply chain reporting regime was introduced from January 2013, which requires all fuel traders to make monthly electronic returns to Revenue of their fuel transactions. Revenue is using this data to identify suspicious or anomalous transactions and patterns of distribution for investigation. We have introduced intensified targeting, in co-operation with other law enforcement agencies on both sides of the Border, of enforcement action against suspected fuel laundering operations.

Deputy Joe O'Reilly and others mentioned the introduction of a new marker. In this regard, following a joint process with Her Majesty's Revenue and Customs in the United Kingdom, a new, more effective fuel marker was identified and will be implemented in the two jurisdictions from the end of March. This will provide a significant boost in the ongoing fight against illegal laundering.

Deputy Calleary referred to the penalties for offences relating to fuel smuggling and laundering and the need to keep them under review. Such penalties are laid down in the Finance Act 2001 and were increased in the Finance Act 2010 to an amount significantly higher than that which had applied previously. For example, the fine on conviction for an indictable offence was increased from €12,695 to an amount not exceeding €126,970. Deputies can be assured that the Minister will keep under review.

A number of Deputies referred to petrol stretching, which involves the illegal addition of kerosene or some other low tax commodity to petrol to defraud the Exchequer and the motorist. The financial gain for criminals of stretching petrol by the addition of kerosene is quite low in comparison to diesel laundering. Revenue estimates that petrol stretching will yield a gain of about 5 cent per litre, whereas diesel laundering will yield a gain of about 50 cent a litre. Revenue is investigating the recent reports concerning petrol stretching and has been in contact with the motor and oil trades. It has taken samples from a number of filling stations that, it has been claimed, may have been sources of such suspicious fuel and will undertake any further inquiries required as a result of reports or information it receives. These inquiries will seek to establish if there is evidence that petrol stretching has occurred and whether there is evidence to support a prosecution.

Deputies, including Deputy John Paul Phelan, raised the issue of tobacco smuggling. Deputies can be assured that combating the illicit trade in tobacco products is, and will continue to be, a high priority for the Revenue Commissioners. This includes a range of measures to identify and target those engaged in the supply or sale of illicit products.

I take on board the comments of Deputies John Paul Phelan and Tony McLoughlin with regard to resources. I will relay their views directly to the Minister for Finance, Deputy Noonan.

I thank Deputies for their constructive and thoughtful contributions during the debate. As the Minister signalled previously, a number of matters are still under consideration for inclusion in the Bill that he may bring forward on Committee Stage and he is looking forward to debating them and some of the other issues raised by Deputies today during the debate on Committee Stage. The Minister will also give consideration to any constructive suggestions put forward by Deputies so far and during the debate on Committee Stage. This is an opportunity for Ireland, in modernising and consolidating our customs law, to get it right and we look forward to a constructive engagement with Deputies on all sides. I commend the Bill to the House.

Question put and agreed to.