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Customs and Excise

Dáil Éireann Debate, Thursday - 30 June 2022

Thursday, 30 June 2022

Ceisteanna (125)

Patricia Ryan

Ceist:

125. Deputy Patricia Ryan asked the Minister for Finance his plans to reform excise duty; and if he will make a statement on the matter. [35102/22]

Amharc ar fhreagra

Freagraí scríofa

The Government is very aware of the impact of rising fuel prices on households and businesses. These trends are driven primarily by global factors. The key drivers of this increase are increases in wholesale energy prices as a result of the rapid rebound in global demand, global supply chain disruptions and the imbalance between demand and supply that emerged as economies re-opened. More recently, as a result of the war in Ukraine, oil and gas prices have risen further. It is not possible for the Government to fully insulate consumers against these price impacts, however, a number of very significant steps have been taken to lessen the impact of increased fuel prices.

On fuel excise, a package of measures, to the value of €320 million, was introduced with effect from 10 March until August 31st, reducing the VAT inclusive excise duty on petrol, diesel and MGO by 20, 15 and 2 cent per litre respectively. These reductions mitigate the cost of a fill of a 60 litre tank by some €12 for petrol and €9 for diesel. This assists all transport users, rural and urban, including commuters, business and farmers. In April these measures were extended to 11 October 2022, with an additional 3 cent reduction for MGO. These measures will cost €417mn from 10 March to 11 October.

In addition to the above rate changes, I also brought forward legislation in Finance Act 2021 to provide for a temporary reduction of 1 cent per litre inclusive of VAT to MOT on petrol and diesel . This reduction came into effect on 1 April. I took this step to partially offset the expected rise in fuel costs arising from an increase in the Biofuel Obligation for transport fuels proposed by my colleague the Minister for Transport. Both rate cuts will remain in place until 11 October this year.

It should be noted that the above changes were made within the constraints of the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended). 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.

The Diesel Rebate Scheme (DRS) was introduced in 2013 with the aim of providing support to road haulage and bus transport operators when the retail price of diesel is relatively high. The DRS operates on a sliding scale basis, whereby a partial rebate of MOT is available when the retail price of diesel exceeds €1.00 per litre excluding VAT. The repayment rate increases gradually as the retail price increases, up to a maximum repayment rate of 7.5 cents per litre/€75.00 per 1,000 litres. At current retail prices the repayment rate is at this maximum.

It is important to note that the effective MOT rate on auto-diesel must be considered in ensuring compliance with the ETD. The effective rate includes the maximum MOT rate repayable under the Diesel Rebate Scheme (DRS), currently €75.00 per 1,000 litres. The current MOT rate on auto-diesel is €405.38 per 1,000 litres, which is €75.38 above the ETD minimum. However, when the DRS is taken into account, the effective MOT rate is €0.38 per 1,000 litres, or 0.038 cents per litre, above the ETD minimum, meaning that any material reduction in the effective MOT rate would be incompatible with EU law.

In conclusion, there are limitations within the ETD as to what I can do in relation to excise, however within these constraints, I propose to keep the taxation of fuel under review as part of preparations for Budget 2023.

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