Michael Noonan (Limerick City, Fine Gael)

This came up in Europe in the crisis in 2004 and again in 2007 and 2008. There is agreement throughout the community that when there are spikes in the price of transport fuels Governments will not alter the taxation element. What the Deputy is saying about VAT is correct, namely, that it applies to the total price. However, the increase from 21% to 23% at budget time, with petrol selling at approximately €1.50 per litre, amounted to an add-on of approximately 3 cent. I accept that this goes on the total price at the end, so it is more like €1.70, but the point is that the spike is not due to tax increases. We imposed no excise increase on diesel or petrol in the last budget. There was a 2% VAT increase and a €5 carbon charge per tonne, which equated to approximately 1.5 cent on a litre. Rather than tax increases, it is international events, in Iran and in the Middle East in general, that are driving the cost of fuel. There is a spike at present and it is very difficult for people. It should also be noted that there is no windfall for the Exchequer as a result of these increases. What happens is that people who have to use their car to get to work will make savings elsewhere. In other words, they are spending more on fuel and less on something else. While the Exchequer takes an additional amount on VAT from fuel, it loses VAT on other parts of the spending profile.

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