Seán Sherlock
Ceist:24. Deputy Sean Sherlock asked the Minister for Finance his views on correspondence regarding fuel costs for the haulage industry (details supplied). [34685/22]
Amharc ar fhreagraWednesday, 29 June 2022
Ceisteanna (24)
Freagraí scríofa
I am very aware of the severity of the financial impact that rising fuel prices are placing on the haulage sector as well as on broader society.
The current trends in energy prices are not unique to Ireland and are in fact, part of a global trend: a multitude of factors is at work. These include the fact that demand for oil and other energy products such as natural gas has increased sharply following the re-opening of many economies in the second half of last year, as well as the impact of the war in Ukraine which continues to negatively affect international energy prices.
It is important to note at the outset that there are constraints on what the Government can do on both excise and VAT rates applying to fuel products such as diesel as a result of EU Directives.
On the excise front, Ireland’s taxation of fuel is based on European Union law as set out in the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. In the case of diesel, which is used as a propellant, the minimum rate is €330.00 per 1000 Litres exclusive of VAT. This equates to 33 cents per litre. The March 9th (pre reduction) rate of Mineral Oil Tax (MOT) on diesel was 53.55 cent per litre exclusive of VAT. This point therefore represented the starting point for Government action in relation to excise reductions on diesel.
As you are aware, the Government excise reductions for diesel implemented in March and April 2022 have brought the overall MOT rate to 40.54 cents per litre (VAT exclusive). This represents just over 7.5 cent per litre over the EU minimum rate of 33 cents per litre. However, any scope for further reduction is removed by the fact that the Diesel Rebate Scheme (DRS), which has been in operation since 2013 and is currently at its maximum payment level of 7.5 cent per litre, brings the effective rate of excise paid to 33.04 cents (VAT exclusive) for those availing of the relief. It is not possible to increase the DRS repayment amount by any further material amount as it would bring the effective rate below the ETD.
The table below provides a comparison of MOT Rates, Effective Rates and ETD Minimum from October 21 to April 22.
|
Auto-diesel rates/1,000L from |
MOT non-carbon |
MOT carbon |
Total MOT |
Effective MOT incl. DRS |
ETD minimum |
MOT rate > ETD min. by |
Effective MOT > ETD min. by |
|
13-Oct-21 |
€425.72 |
€109.74 |
€535.46 |
€460.46 |
€330.00 |
€205.46 |
€130.46 |
|
10-Mar-22 |
€303.77 |
€109.74 |
€413.51 |
€338.51 |
€330.00 |
€83.51 |
€8.51 |
|
01-Apr-22 |
€295.64 |
€109.74 |
€405.38 |
€330.38 |
€330.00 |
€75.38 |
€0.38 |
The position in relation to VAT is that under EU rules, there is a standard rate which applies to most products and services. In addition, a Member State can have two reduced rates. Ireland’s standard rate is 23%, and its two reduced rates are 13.5% and 9% respectively.
Annex III of the VAT Directive determines what products and services can fall into the reduced rate categories. In this regard, it should be noted that petrol and diesel are standard rated products. Therefore, the rate of VAT is 23%. There is no potential for them being classified as reduced rates.
As there can only be one standard rate of VAT, any reduction in this rate must be applied to all other products and services that fall into this standard rate category. What this means therefore is that there is a very significant exchequer cost for any reduction in the standard rate. For instance reducing it by 1% would cost approximately €542m per annum. A reduction in VAT on diesel to 15% the minimum rate at which the standard rate can be set would cost the Exchequer €4.34 billion in revenue.
In relation to the issue of VAT being charged on other taxes, the Deputy should note that Revenue advise that this is standard practice. Further details can be found at the following link: www.revenue.ie/en/vat/charging-vat/on-what-amount-do-you-charge-vat/index.aspx
In summary, you will note that the Government has brought excise rates on diesel to the minimum level under EU rules through a combination of an excise reduction, and the application of the DRS.