Michael McGrath (Cork South Central, Fianna Fail)
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Question 129: To ask the Minister for Finance if he has held discussions with his counterpart in the Northern Ireland Executive on the best way to tackle the problem of cross-Border fuel smuggling and the consequent loss of Exchequer revenue; and if he will make a statement on the matter. [1513/12]

Michael Noonan (Limerick City, Fine Gael)
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This issue is under ongoing discussion with the Northern Ireland authorities. I am informed by the Revenue Commissioners, who are responsible for the collection of mineral oil tax and for tackling the illicit trade in fuel products, that they are aware of the threat to the Exchequer posed by laundered fuel. The predominant illicit activity in the mineral oil area in both Northern Ireland and the Republic is the laundering of marked diesel and its sale through illegal outlets. In both jurisdictions the respective difference in excise rates between marked (rebated) and normal diesel offers a considerable incentive for oil laundering and this illicit activity poses a serious threat to the Exchequer and the economy on both sides of the border. Revenue employs a broad range of compliance and enforcement strategies to detect and counteract illegal practices involving mineral oils. These include ongoing analysis of the nature and extent of the problem; development and sharing of intelligence with agencies on both sides of the border; the conduct of intelligence driven operations using covert surveillance to identify oil laundry locations; seizure of illicit product, laundering equipment and vehicles; physical sampling at road checkpoints; closure of unlicensed or improperly licensed outlets and seizure of stock and prosecution of those involved in illegal activities in relation to mineral oils.

Revenue is currently engaged in a vigorous campaign targeting specific locations nationwide, with the intention of immediate closure of unlicensed outlets and the challenging of other instances of non-compliance. As part of this drive, warning letters have been issued to unlicensed retail outlets and a number of these have been effectively closed down by the actions of Revenue enforcement teams. This campaign is ongoing and Revenue is in the process of seizing illicit product and closing down a further number of unlicensed or otherwise illegal retail outlets.

Revenue continuously keeps under review the effectiveness of legislation and regulations in relation to combating the illicit trade in mineral oil. This includes reviewing powers, penalties, etc, and making recommendations to my Department where legislative amendments are required. The ongoing review of effectiveness includes consideration of alternative approaches, as referred to by the Deputy, to tackling the illicit removal of fuel marker. General consideration has been given, in this context, to a rebate system. However, Revenue advises me that such a system would pose different problems. It would involve the establishment of a very extensive repayment system, giving rise to a very significant administrative burden for oil traders, consumers and for Revenue and would pose significant cash-flow difficulties for those who currently use marked gas oil. Repayment regimes are vulnerable to abuse and liable to be exploited by criminal elements, such as those currently involved in fuel laundering.

Revenue is currently reviewing its enforcement options in the context of reductions in the sulphur content of some fuels that have been introduced under recent EU environment legislation. The matters being addressed include the potential development of an enhanced fuel marker. In this regard, close liaison has been established with HM Revenue & Customs. Revenue is also considering strengthening the Regulations governing the keeping for sale of fuel products and a renewed focus on links in the laundered fuel supply chain.