Mr. Gerard Moran:

I thank the Chairman. As the members will see, my opening statement is a little broader in focus than simply petrol stretching. I hope this might be helpful in providing a little context for the main focus.

Firstly, I want to thank the members of the committee for the opportunity to contribute to this discussion. Fuel fraud has been a very significant challenge for Revenue over the past three to four years and we have worked very hard to tackle the problem. To start the discussion, it might be helpful if I outline briefly the steps we have taken to tackle fuel fraud, and to brief the committee on our response to the recent reports of damage to petrol engines.

In recent years diesel laundering has been the principal, if not exclusive, focus of the organised crime groups involved in fuel fraud. The price differential between road diesel and marked diesel - at well over €0.50 per litre - and the low cost of removing the marker from marked diesel, made laundering a very profitable crime. From 2011, Revenue responded very aggressively and has re-engineered the regulatory regime for the fuel sector. Our aim has been to put in place a number of supply chain control measures designed to make it much more difficult to source marked fuel for laundering and to get laundered fuel onto the market. On the back of this strategy, Revenue has closed over 130 filling stations and seized 3 million litres of fuel since 2011, and all the available indicators point to a very positive impact on behaviour in the sector. Industry sources indicate a much-reduced incidence of laundered fuel on the market, and road diesel consumption and tax revenues are up by about 13% compared with a couple of years ago.

Obviously, other economic factors have contributed to this growth, but reduced fraud is also an important factor. However, there is no room for complacency or slippage; diesel laundering has not been eliminated, so we need to continue to police the supply chain and tackle the criminal elements involved in this activity. The introduction of a new more effective marker here and in the UK from the end of March next will be a further important step in eliminating this fraud.

Turning to the recent cases of damage to petrol engines and the suggestions of a petrol stretching problem, Revenue’s stance is to investigate fully to establish if there is any evidence of tax fraud. With the progress that has been made in squeezing diesel laundering operations, we are very alert to the possibility that organised crime groups may diversify their operations further into other types of fraud in the fuel sector and elsewhere. Petrol stretching is a risk, but the potential revenues for criminals are very modest compared to diesel laundering. Petrol stretching would normally involve the illegal addition of methanol, but it can only be added in relatively small quantities, typically less than 10%, before problems arise and the fraud becomes self-defeating. Assuming that methanol costs 59 cent per litre and could be added up to a threshold of 10%, the potential return from the fraud is less than 9 cent per litre and adding 5% methanol would generate a return of little more than 4 cent per litre. While the incentive for petrol stretching is relatively modest, there is always some level of risk.

Where contamination or adulteration of petrol or any other fuel takes place, the explanation may be fraud or it may be a handling accident. Accidental cross-contamination occurs occasionally, for example, where diesel is delivered into the wrong storage tank. Where this occurs, the contaminated fuel is recovered and taken off the market and the duty on the recovered fuel is repaid. In this case, no trader has come forward and claimed or admitted accidental contamination, so Revenue is continuing to investigate to establish if there is evidence of fraud. So far we have not reached any conclusions, but we are pursuing our inquiries back through the supply chain from the retailers involved.

From the complaints received to date, the problem seems to be concentrated largely in the west, predominantly in Mayo and Roscommon, with another concentration centred on Meath. It also seems to relate to fuel supplied in July or earlier; ongoing sampling has not found evidence that current petrol supplies are contaminated, and it seems that more recently reported cases of damage to engines may be attributable to a time lag between getting contaminated fuel and subsequent engine damage.

Petrol samples have been taken from each retailer identified by complainants as the source of contaminated fuel and samples have also been obtained from some of the damaged cars. Analysis of the samples by the State Laboratory is still ongoing but, to date, they do not point conclusively to the source of the problem. However, it may be the case that the time lag between the cause of the problem and the taking of samples meant that the contaminated fuel had already been "washed" through the system before the samples were taken. Kerosene was detected in petrol samples taken from one filling station and that petrol was seized and a prosecution case is being prepared. We also found very small traces of diesel in a number of samples and we are trying to establish if this is due to the way the two products are handled by some distributors or if it is a residue of an earlier more significant cross-contamination.

Given that we have not arrived at a satisfactory explanation of what has happened, we are continuing our investigations, and in particular we want to establish if there is any evidence of tax fraud. This matter will not be closed until we have completed a thorough investigation of the supply chain for evidence of fraud or breaches of excise law or licensing conditions. I hope this brief outline of our approach to tackling fuel fraud is helpful for the committee. I am happy to clarify or elaborate on any points and of course I am happy to answer any questions.