Financial Resolutions, 2000. - Financial Resolution No. 1: Excise – Hydrocarbon and Substitute Motor Fuel.
Wednesday, 6 December 2000
Dáil Eireann Debate
(2) THAT the rebate of duty on mineral hydrocarbon light oil provided for in section 56(3) of the Finance Act, 1988 (No. 12 of 1988) shall, as respects mineral hydrocarbon light oil on which it is shown to the satisfaction of the Revenue Commissioners that duty at the rate specified in section 89 (2) of the Finance Act, 1998 (No. 3 of 1998) has been paid on or after 7 December 2000, be calculated at the rate of £86.92 per 1,000 litres and Schedule 2 to the Act of 1999, as inserted by the Act of 2000, is amended by the substitution of “£274.44 per 1,000 litres” for “£294.44 per 1,000 litres” opposite the reference to Light Oil: Unleaded petrol.
(3) THAT the duty of excise on hydrocarbon oil imposed by paragraph 12(1) of the Imposition of Duties (No. 221) (Excise Duties) Order, 1975 (S.I. No. 307 of 1975), shall, in lieu of the rate specified in section 82(5) of the Act of 1997, be charged, levied and paid, as on and from 7 December 2000 at the rate of £196.14 per 1,000 litres and Schedule 2 to the Act of 1999, as inserted by the Act of 2000, is amended by the substitution of “£196.14 per 1,000 litres” for “£256.14 per 1,000 litres” opposite the reference to Heavy Oil: Used as a propellant.
(4) THAT the duty of excise on substitute motor fuel imposed by section 116(2) of the Finance Act, 1995 (No. 8 of 1995), shall, in lieu of the rate specified in section 82(6) of the Act of 1997, be charged, levied and paid, as on and from 7 December 2000 at the rate of £196.14 per 1,000 litres and Schedule 2 to the Act of 1999, as inserted by the Act of 2000, is amended by the substitution of “£196.14 per 1,000 litres” for “£256.14 per 1,000 litres” opposite the reference to Substitute Fuel: Used as a propellant.
(5) IT is hereby declared that it is expedient in the public interest that this resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
This resolution provides for a reduction in the excise duty rate of 2p per litre on unleaded petrol which, when VAT is included, amounts to 2.42p per litre with effect from midnight and a reduction in the excise duty rate of 6p per litre on auto diesel which, when VAT is included, amounts to 7.26p per litre with effect from midnight. There is also an excise duty reduction on substitute motor fuel which, when VAT is included, amounts to 7.26p per litre with effect from midnight.
Provision is also made to reflect these reductions in the consolidated mineral oil tax legislation in the Finance Act, 1999. That legislation is not yet in operation. It will be commenced by ministerial order when the necessary secondary legislation and Revenue staff instructions are finalised.
It is expected that both these reduction measures will cost the Exchequer £8.4 million in 2000 and £162.3 million in a full year. The combined effect on the consumer price index – CPI – of these two measures will be a reduction of 0.2%.
An EU Council directive obliges member states to apply minimum rates of excise duty on mineral oils. The reduction in the auto diesel rate, which will bring the revised rate down to almost the agreed EU minimum level, will be of significant benefit to the road haulage sector as well as to other users of diesel such as coach tour operators.
The total tax take from these two commodities will reduce further on 1 January 2001 as a result of the proposed reduction in VAT from 21% to 20%. The overall tax reduction in the price of a litre of unleaded petrol will be 3.02p and in a litre of auto diesel it will be 7.81p per litre.
As stated in the Budget Statement by the Minister for Finance, the Government is anxious to encourage the use of low sulphur diesel for  environmental reasons. While the proposed excise duty rate reduction of 6p per litre will apply to all diesel for the present, it is proposed that in the future this lower rate will apply to low sulphur diesel only. Such a differentiation in excise duty rates requires EU approval which will be sought in the very near future. The intervening period should allow oil companies to make provision for nationwide availability of this fuel and to allow transport operators sufficient time to make the switch to the cleaner more environmentally friendly fuel.
Mr. Naughten: I am delighted the Minister decided to tackle this issue as the price of diesel is exerting immense pressure on overhead costs for indigenous industry, particularly road hauliers, many of whom have 12 month contracts. This is causing huge problems for them and has an effect on inflation. The Tánaiste's objective of attracting industries to the regions will be helped by this resolution, which will help to reduce the barrier.
Why has a reduction in duty on rape seed oil diesel not been considered? Why should the excise duty on renewable energy sources be the same as that for hydrocarbons? This does not encourage the use or development of such technology, although I am aware that Maxol has developed the rape seed oil diesel technology to a certain degree. Why are we not encouraging its development and use by reducing the excise duty on renewable energy sources? The Government should have considered an additional reduction in the resolution to encourage the introduction of low sulphur into this market and the development of engines which are more efficient in using diesel. I had hoped the Minister would address that.
Mr. Gilmore: The Labour Party will oppose this motion. It is presented by the Government as a reduction in the prices of diesel and petrol. A few weeks ago, however, the Government published its national climate change strategy to great fanfare. It told us what we already know, that this planet is in danger from the increase in greenhouse gases.
This country is way ahead of the targets that were agreed in Kyoto. The increase in emissions resulting from the growth in private transport in this country is contributing enormously to the increase in greenhouse gas emissions. We must reduce them. The Minister, Deputy Dempsey, when he announced the strategy, said we would have to change our ways and consider various types of green taxation. There were also undertakings in previous budgets that sometime in the  future the Government would introduce some form of eco or green taxes.
The opportunity to do that was presented in this budget. However, there is no mention of the introduction of green taxation. Second, there is no mention of the climate change strategy in the Budget Statement or the accompanying documents. There was a commitment in the programme for Government that policies would be eco audited but there is no reference to that in the budget. An audit has been done, quite rightly, on the national poverty strategy but there is no eco audit in the budgetary provisions. There is a Government policy and strategy in relation to sustainability but there is no reference to sustainability in the budget.
This budget forgot the environment. The Minister, Deputy Dempsey, was in The Hague last week to support the European position at the conference in relation to the Kyoto targets. On climate change, the Minister, Deputy Dempsey, is beginning to sound a little like Deputy O'Dea on taxis, great at the conference in The Hague but with no impact at the Cabinet table in relation to this motion. This resolution is a step in the wrong direction. The Minister said hard decisions will have to be taken if we are serious about our climate change strategy. This is one such decision but it has not been taken. The Government is taking the softer option by postponing its concern for the environment. It is acting contrary to its published climate change strategy.
It is a sad irony that the Tánaiste, who claims credit for ridding Dublin of its smog problem, is the proposer of this resolution. She told the House what it will cost. Will she tell us what impact the proposal will have on the targets in the national climate change strategy, particularly the targets for greenhouse gas emissions caused by the private transport sector? What assessment has been made by the Government in relation to those targets?
Mr. Higgins: (Dublin West): I do not support the imposition of indirect taxes on certain items as a mechanism for controlling their use. That is not the way it should be done. Alternative methods must be found so I am not opposing the Government's proposal.
The imposition of taxation, even on cigarettes which are bad for one's health, is a discrimination against low paid workers in particular. If hydrocarbon taxes were increased today, for example, it would be an imposition on working people who have no alternative in present circumstances but to use their car. That is the sad reality.
I agree with much of Deputy Gilmore's contribution. The targets for reducing air pollution must be met. I bitterly regret, therefore, that while the Government reduced taxation in this area, there were no complementary measures to  reduce the amount of pollution put into the air as a result of the current traffic problem. There was a mention of public transport but in the national plan spending in that area is still hugely inadequate relative to the amount spent on roads. A huge shift to public transport in terms of both goods and passengers is a critical means of reducing the amount of fossil fuel being used and the amount of air pollution being generated.
I am bitterly disappointed the Government did not propose a substantial investment in research and development of alternatives to diesel and petrol for passenger and haulage vehicles. The oil companies which dominate the market in hydrocarbons have no interest in reducing pollution. The opposite is the case. Their super profits are generated by increased use of these fuels. The State should step in. There are many ideas and possibilities and plenty of talent. A huge investment should have been made today in research and development of alternative fuels. The nod in the direction of the hybrid engine technology is wholly inadequate.
On a day when the Government had a large surplus to distribute, it missed a major opportunity to strike a blow for environmental conservation. I hope the Minister will think again when formulating the Finance Bill and arrive at a more enlightened and effective strategy.
Mr. Sargent: This measure is an advertising dream for the oil companies. They can continue in their business in the usual frame of mind. They will try to convince people, and succeed to some extent, that they have suddenly become environmentally concerned and are opting for sustainability. That is living in denial. It has similarities with drug addiction and switching from heroin to methadone. Regardless of what analogy one wishes to use, this is simply a way of postponing the radical changes that are needed under the guise of an environmental measure.
That is a sad and short-sighted way of dealing with the warning signs being given in stark clear terms that unless we curtail the burning of fossil fuels we will regret it in terms of the weather, the vulnerability of an economy that will have to deal with large increases in oil prices or through the fines that will be imposed on us if and when an agreement is reached when The Hague conference next reconvenes. The renewables, such as rape seed oil, are still seen as hydrocarbons.
That is the big failing, that the Minister, even as a minimal measure, could have adopted this in the budget. That has resulted in other countries, fellow member states in the European Union, particularly Germany, France and Italy, developing industries which are very competitive and rewarding from an economic as well as an environmental point of view, in the rapeseed oil type sector. However, in Ireland, people who are pioneering that, such as people in Teagasc and  the private sector, are frustrated to the point they are giving up. They do not see the Government as being interested in renewable fuels. In general they feel that we are far too late in developing our options in that area in that only 2% has been given as an EU target for the development of renewable fuels. Some 2% of our vehicular fuel needs are to come from the likes of rape seed oil and those countries are gobbling up the quota as quickly as they can. We could have developed this and we could have done something, very simply, by having less excise – or none – on rape seed oil. However, once again we missed the boat, which is a crying shame.
The global warming predicament, as mentioned by Deputies Gilmore and Higgins, presents us with a crisis that we simply are not capable of comprehending. The Minister for Finance has shown, in a fairly predictable but sad manner, that he is not able to contemplate the changes that are not optional but required. That is the saddest legacy of this flawed budget. This measure does nothing but rub salt in the wounds, indicating there is concern when in fact the concern is so thin that it is meaningless.
Mr. Enright: The Road Hauliers' Association, compared with road hauliers' associations across Europe and particularly in Britain, was restrained and entered into dialogue with the Government, there was no confrontation. In this instance it is essential to recognise the facts of life, that there is a very poor network of railways. In Cavan, Donegal and all that area, there is no way of transporting products from Donegal across the mid-west other than by road.
Similarly my area, south Offaly, has no rail service. There is quite a good rail service from both Tullamore to Dublin and Portlaoise to Dublin but it should be upgraded and improved. With regard to this measure, we must recognise that once imported oil prices go up, the cost of transport of essential items, such as bread, butter and milk, with an increase in the cost of petrol and diesel, will also go up.
The reduction in VAT is essential. Our party proposed a reduction from 21% to 19%. It should be 18% but 19% would have been a change of some importance. The Minister has brought it down to 20% which is welcome but he should have gone a stage further. With inflation and everything else, it would be of great benefit to have reduced it to 19%.
Overall with regard to this, we are talking about hydrocarbons and substitute motor fuel.  The Minister's speech sadly lacks anything in regard to research into alternative fuels which is a pity. He talked about hybrid engine technology and so on, but more time and money should be devoted to researching alternative fuels. I fully accept the problems of the greenhouse gas emissions and the problem we are facing but regrettably, the Government has done very little research in this important area.
Mr. Enright: Precisely. That is what I am saying. We are talking about goods and items that will be transported by road. We should have been moving on this and there is nothing in this document that will assist it. The transport cost of these items by rail would have been far greater and there is a provision of only £2.25 billion for public transport infrastructure. That is an area where we should be heading and it would mean using far less fuels causing so much emissions.
Ms Harney: The most effective way to ensure that people are less dependent on their private motor vehicles is to put in place a decent transport system. Unfortunately, in the past we were very negligent in this area and many of our railways were run down. That is why there is such a heavy emphasis, both in the Government's plans and policies and particularly the national development plan, on putting in place, countrywide, a decent transport system and upgrading our road network because, with better roads, there is a more efficient use of public and private vehicles.
It is not correct to say that the Minister gave no attention to the environment in his address. This measure is being implemented for two reasons. One is because of the unprecedented rise in oil prices internationally and the huge burden and difficulties that is placing on the haulage and tour operator section of our community. It is also being done as an anti-inflationary measure. For example, a truck with a 500 litre tank will save £35 as a result of the measures we are taking here.
The Minister referred to the new hybrid engine technology for which he intends to bring incentives forward in the Finance Bill. That reduces emissions and conserves energy. He is proposing that half of vehicle registration tax would be refunded for a two year period for the purchasers of new hybrid engine technology. I strongly support that as it is the appropriate way forward.
As it happens, the growth rate of petrol consumption in Ireland is in decline. In 1998, for  example, the growth was about 11.65% over the previous year, in 1999, it was 8.5% and this year it is forecast perhaps to be 7.9%. That is because we have more environmentally friendly vehicles that are using fuel far more efficiently, which I welcome.
In relation to renewable resources, a number of years ago I understand that incentives, which I do not remember, were included in the Finance Bill for experimental biofuel programmes and they were largely ignored. Only one small programme involving a handful of vehicles was initiated but, in spite of several discussions with potential operators about possible initiatives some years ago, no operator came forward and the sector lapsed in 1995. For technical reasons, we must include “substitute motor fuel” such as bio-fuels here but, unfortunately, they are not in use in Ireland today.
Ms Harney: I have personal experience of that as I was taken from one side of Dublin to the other some years ago in a vehicle Charlie owned. I am impressed that Deputy Enright is so well informed about his former constituency colleague's technologies and interests.
The proposed imposition of the UK disc could have a major impact on Irish hauliers and may lead to internal market difficulties. I understand that no indication has yet been received of the rate which will apply. The UK has the highest rate of excise on diesel in the EU, even after the recent reductions there. The Irish Congress of Trade Unions called for these measures, as did members of the Fine Gael Party whom I thank for their consistency. We are not all always consistent in politics.
Ms Harney: I do not accept that this measure will have the kind of dire environmental consequences forecast by some Opposition Deputies. As an environmentalist, however, I look forward to an era when we move further away from income tax and towards environmental taxes generally.
Ms Harney: Ireland could not do that by itself; it would have to happen at least on an EU-wide basis and perhaps further afield as it would funda mentally alter competitiveness and the way things are done. While some countries have tended to impose environmental taxes of one kind or another in the past as barriers to trade, from the point of view of an open economy like ours, we can only move forward in the context of developments which would occur EU-wide.
Ms Harney: The ESRI disagrees with my views on many issues, including my views on tax in recent years. I have huge regard for the ESRI but disagree with it in many areas. I particularly disagree with the view that we should not make tax cuts in good times because they are inflationary or in bad times because we cannot afford them. I find that view somewhat inconsistent.
I commend this resolution to the House. I appreciate the support of the Deputies who have spoken in favour of it and acknowledge the reservations expressed by Deputy Gilmore and others. As Deputy Higgins stated, I am not convinced that the imposition of high taxes in particular areas as once-off measures has the effect on behaviour which we may, at times, anticipate.
Mr. Naughten: I had hoped the Tánaiste would tell us why we have the same excise duty on renewable fuels as on hydrocarbons. Does she not agree, as the Minister responsible for science and technology, that we should be researching and resourcing the development of alternative fuels? Ireland will always be vulnerable unless it develops alternative fuel sources.
Mr. Gilmore: I asked the Tánaiste to explain to the House what impact this proposal would have on the targets outlined in the national climate change strategy. The only reference to the environment in the Budget Statement are the words “hybrid engine technology”, which is not really surprising as the Government itself is something of a hybrid engine.
Mr. Sargent: Is the Tánaiste saying that this resolution is as far as it goes in regard to fiscal measures in relation to the environment and that we must wait for EU-wide action on eco taxes, in spite of the ESRI's assertion that we would maintain our competitiveness if we were to introduce such taxes? Is the Tánaiste saying that the ESRI is employing the wrong people or has not done its research properly?
Ms Harney: As Minister with responsibility for competition and consumer affairs, I want to expressly state that this will be passed on to the customer. That will be vigorously policed and vigilantly enforced.
I want to respond to Deputy Sargent's comments on the ESRI. If we were to go down the road of eco taxes on our own, people could cross the Border to Northern Ireland or could travel to the UK or other countries.
Ms Harney: It certainly has not. The Minister for the Environment and Local Government made it clear in his strategy on national climate change, with which Deputy Gilmore is familiar, that tax measures would be introduced this year on a phased and incremental basis in a broad range of sectors.
Browne, John (Wexford).Byrne, Hugh.
de Valera, Síle.
Kitt, Michael P.
McGuinness, John J.
Ó Caoláin, Caoimhghin.
Ó Cuív, Éamon.
Wright, G. V.
|Broughan, Thomas P.
O'Sullivan, Jan. Penrose, William.
| Spring, Dick.
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