Dáil Éireann Debate, Tuesday - 15 October 2019
146. Deputy Michael Fitzmaurice asked the Minister for Finance if an exemption exists within the tax system regarding the increase in the carbon tax for an agricultural contractor who is carrying out agricultural work for a farmer; and if he will make a statement on the matter. [42022/19]
Amharc ar fhreagraIn my Budget 2020 speech, I announced an increase from €20 to €26 in the carbon tax. Following the approval of the Dáil, this increase has been applied to Mineral Oil Tax (MOT) rates for mineral oils used as auto-fuels (for cars and trucks) from midnight on 9 October 2019. All other MOT rates remain at their current levels until 1 May 2020 when new rates will take effect subject to the enactment of the Finance Bill 2019.
The current rate of MOT for marked gas oil (MGO), also referred to as “green agricultural diesel”, is €102.28 per 1,000 litres, comprised of a carbon charge component of €54.92 and a non-carbon charge component of €47.36 per 1,000 litres. These rates did not increase from Budget night. From 1 May 2020 the MOT rate for MGO will be €117.78 per 1,000 litres, arising from the increase of the carbon component from €54.92 to €70.42; the non-carbon component will not change from its current level of €47.36 per 1,000 litres.
When carbon tax was increased in Budget 2012, provision was made for a tax relief for farmers to compensate them for the increase. The statutory basis for the tax relief is section 664A of the Taxes Consolidation Act 1997. It is available to individuals and companies that carry on a trade of farming and are entitled to claim an income tax or corporation tax deduction in respect of farm diesel.
Section 664A provides 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). Revenue advise me that agricultural contractors are not entitled to this relief as they are not carrying on a trade of farming. This, they advise, is because farming, which is defined in section 654 of the Taxes Consolidation Act 1997, requires the occupation of farm land and agricultural contracting does not involve the occupation of farm land. However, Revenue agricultural contractors who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for those expenses, including any carbon tax charged in respect of the diesel.
