Carol Nolan
Ceist:360. Deputy Carol Nolan asked the Minister for Finance if he plans to reform the taxation of HVO and biofuel for HGVs; and if he will make a statement on the matter. [42644/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (360)
Freagraí scríofa
I understand that the Deputy is asking about the taxation of hydrotreated/hydrogenated vegetable oil (HVO) and other biofuels used as motor fuel in heavy goods vehicles (HGVs).
The Finance Act 1999 provides for the application of an excise duty to specified mineral oils, such as petrol, diesel, and kerosene, that are used as motor or heating fuels. This excise duty is called Mineral Oil Tax (MOT) and comprises a carbon and a non-carbon component. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as “excise”, “fuel excise” or “fuel duty”. The table below provides the current MOT rates for petrol, auto-diesel, and natural gas used as a propellant (referred to vehicle gas).
|
Fuel Type |
MOT non-carbon |
MOT carbon |
Total MOT |
|
Petrol |
€371.11 per 1,000L |
€94.87 per 1,000L |
€465.98 per 1,000 per 1,000 litres |
|
Auto-diesel |
€295.64 per 1,000L |
€109.74 per 1,000L |
€405.38 per 1,000 per 1,000 litres |
|
Vehicle gas |
€1.95 per MWh |
€7.41 per MWh |
€9.36 per megawatt hour (MWh) |
Biofuels are products that are made of biomass of animal or vegetal origin. Liquid biofuels, such as HVO, are taxed at the MOT rate that applies to the fuel they are used in place of. For example, biofuel used in place of auto-diesel in a motor vehicle would be taxed at the MOT rate for auto-diesel.
MOT law provides for a relief for biofuels from the carbon component of MOT. This means that biofuel produced entirely from biomass is liable for the non-carbon component of MOT only. In the case of such a biofuel used in place of auto-diesel, the MOT carbon component of €109.74 per 1,000 litres is fully relieved and the applicable MOT rate is €295.64 per 1,000 litres. With regard to blended fuels produced partially from biomass, the relief applies to the portion of fuel that meets the biofuel criteria set out in MOT legislation. The biofuel relief is intended to promote a higher level of biofuel for transport use and supports Government’s commitment to incentivising more environmentally friendly alternatives to fossil fuels.
In relation to Value-Added Tax (VAT), the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. Ireland currently operates two reduced rates of VAT, 13.5% and 9%, as permitted by the Directive.
Motor fuels such as petrol including bio-ethanol petrol blends and auto-diesel are not included in the categories of goods and services on which the EU Directive allows a lower rate of VAT or an exemption to be applied, and so they are liable to VAT at the standard rate, currently 23%.
The Deputy may be interested to know that VAT registered businesses are entitled to recover the cost of VAT on the purchase of diesel, used in the course of their business, as is the case with most business costs. However, the VAT Consolidation Act provides that VAT on petrol is not recoverable, including by businesses registered for VAT, except where the petrol is purchased as stock-in-trade of the business.
With regard to reform of taxation of biofuels, the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
Question No. 361 answered with Question No. 317.