Wednesday, 9 May 2012

Ceisteanna (46)

Dominic Hannigan


49 Deputy Dominic Hannigan asked the Minister for Finance his plans to help consumers with the rising price of fuel; and if he will make a statement on the matter. [23125/12]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Minister for Finance)

Ireland, as with other countries, has experienced an increase in the cost of petrol and auto-diesel. This is an international phenomenon driven by a number of factors including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices over recent periods reflected additional factors such as geopolitical uncertainty in Northern Africa and the Middle East with potential supply disruptions. The excise rates (including the carbon charge) in Ireland on motor fuels are 58.8 cent per litre of petrol and 47.9 cent per litre of auto-diesel. However, our rates remain lower than many of our main trading partners and significantly lower than our nearest neighbour the UK. The rates for petrol and auto-diesel were increased with effect from 7 December 2011, arising from an increase in the carbon charge for those fuels from €15 to €20 per tonne of CO2 emitted. This represented an increase of less than 1.5 cent per litre in the case of petrol and just over 1.5 cent per litre in the case of diesel, when VAT is included. The rate of VAT that applies to those fuels increased from 21% to 23% with effect from 1 January 2012.

The Exchequer yield from excise, as excise is set at a nominal amount, does not increase as the price of fuels increase. On the other hand, the yield from VAT per litre of fuel, as VAT is set as a percentage of the price, increases as the price of fuels increase. However, in this regard it should be borne in mind that to the extent that spending in the economy is re-allocated to petrol and other oil products, and away from other VAT liable spending, and to the extent that the overall level of economic activity is reduced by higher oil prices, there may be little or no net gain to the Exchequer.

It should also be noted that businesses are of course entitled to reclaim VAT incurred on their business inputs, including VAT incurred on fuel. For example, VAT incurred on auto-diesel and marked gas oil (MGO or green diesel) used in the course of business is a deductible credit for business in the Irish VAT system. VAT on petrol can not be deducted/reclaimed.

There are no plans for temporary taxation adjustments, as to do so, could lead to significant costs to the Exchequer. The issue of rising fuel prices was discussed by EU Finance Ministers at an ECOFIN meeting last year where they reconfirmed the approach taken in 2005 and again in 2008, when oil prices were very high, which endorsed a coordinated approach towards not making distortionary fiscal adjustments.