Dáil Éireann Debate, Tuesday - 30 April 2024
227. Deputy Claire Kerrane asked the Minister for Finance if he will prevent the fuel excise increase scheduled for 1 May 2024 given the financial pressure farmers and contractors will face as a result of further increases to the cost of fuel; and if he will make a statement on the matter. [18826/24]
Amharc ar fhreagra235. Deputy Richard O'Donoghue asked the Minister for Finance if he will postpone the introduction of a carbon tax increase on agricultural diesel from 1 May 2024 to 1 October 2024, due to the escalating costs incurred by farmers over the winter period due to the bad weather; and if he will make a statement on the matter. [19064/24]
Amharc ar fhreagraI propose to take Questions Nos. 227 and 235 together.
The Finance Act 1999 provides for the application of excise duty, in the form of Mineral Oil Tax (MOT), to liquid fuels used for motor or heating purposes. MOT comprises a carbon component, or carbon charge, which is usually referred to as carbon tax. MOT also comprises a non-carbon component which is often referred to as “excise” or “fuel excise/tax/duty”. It is important to note that both components of MOT are excise.
Under MOT law standard rates apply to auto-fuels for use in road vehicles. Reduced rates apply to fuels used for other purposes such as in agricultural tractors and machinery. Diesel that is supplied at a reduced MOT rate must be marked with prescribed fiscal markers and is referred to as marked gas oil (MGO), or green/agri/farm diesel.
Reduced MOT rates are significantly lower than standard rates. MOT rates are published on the Revenue website at www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf.
Government and I are conscious of the implications of fuel costs for all sectors of society. This is reflected in the fact that in 2022, in light of the acute impact rising prices were having on households and businesses, the Government provided for temporary cuts in MOT rates which, inclusive of VAT amounted to 21 cent, 16 cent and 5.4 cent per litre on petrol, auto-diesel and marked gas oil, respectively. These temporary cuts to MOT rates were initially due to end on 31 August 2022, but following a review and monitoring of fuel prices they were extended until February 2023, with a phased restoration beginning in June 2023, followed by a second restoration in September 2023.
A final restoration of excise rates was due to take place on 31 October 2023, but in Budget 2024, I provided for a further extension until 31 March last, with a phased restoration occurring in two stages on 1 April last and 1 August next.
The MOT increases, which will come into effect on 1 May 2024, are provided for in legislation, which was introduced in Finance Act 2020 to support Government’s commitment to emissions reductions. Under the 10-year carbon tax trajectory the amount charged per tonne of carbon dioxide emissions from fuels will increase annually to reach €100 by 2030. Delivering on the 10-year carbon tax trajectory also features as one of the nine reform measures in Ireland’s National Recovery and Resilience Plan.
The table below details the current reduced MOT rate per 1,000 litres for farm diesel, and the rate effective from 1 May 2024, broken down into carbon and non-carbon components. For comparison the standard MOT rates applicable is auto-diesel are also included.
|
Fuel/MOT effective date |
Non-carbon component |
Carbon component |
Total MOT |
|
Farm diesel – current rate |
€32.49 |
€131.47 |
€163.96 |
|
Farm diesel – rate from 1 May 2024 |
€32.49 |
€151.81 |
€184.30 |
|
Auto-diesel – current rate |
€401.33 |
€149.89 |
€551.22 |
In addition to the reduced rate of MOT on farm diesel for agricultural purposes, section 664A of the Taxes Consolidation Act 1997 provides relief for expenditure incurred in respect of an increase in the carbon tax on farm diesel. Relief is given in the form of a deduction for the additional amount of expenditure on the carbon tax incurred by persons carrying on a trade of farming on the purchase of farm diesel. This relief does not apply to agricultural contractors as they are not carrying on a trade of farming.
The way the relief operates is that, in computing profits of a farming trade, a farmer may claim an income tax or corporation tax deduction for farm diesel that 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. This was the rate applicable from 1 May 2010 when carbon tax was introduced and applied until 30 April 2012. The farmer is also entitled to claim a deduction for expenditure on the farm diesel (including the carbon tax charged in respect of the diesel).
Further information on the relief is available on the Revenue website at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-23/23-01-36.pdf.
Consequently, I am not proposing to postpone the 1 May carbon tax increase on farm diesel.
