Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Deputy for raising this matter this afternoon. As the Minister for Finance, I recognise the negative impact that the combustion of diesel can have. Having said that, Ireland already has one of the highest excise rates on diesel in the European Union at 48 cent per litre. Over the lifetime of this Government, the excise rate on diesel has been increased by 8.5 cent per litre through a combination of increases imposed through the introduction of the carbon tax as well as specific excise increases on diesel.

The excises on mineral oils in Ireland raise approximately €2 billion for the Exchequer each year. Some €1.2 billion of this is attributable to diesel. These excises assist the Government in dealing with the costs of the externalities associated with the use of mineral oil, as well as helping fund services in general.

Excise is not the only policy tool we have to incentivise the use of cleaner modes of transport and vehicles on our roads. In July 2008, the basis of vehicle registration tax moved from the vehicle's engine size to the volume of carbon dioxide emitted from the vehicle. This means motor cars with higher emissions attract a higher liability. Also in July 2008, the system of annual motor tax moved from engine size to an emissions basis, thereby ensuring an ongoing economic penalty to the most polluting vehicles. These measures are designed to reduce harmful emissions into the environment. The average new car is now 28% cleaner than in 2007, which is leading to a cleaner overall fleet of vehicles on our roads. In addition, I have extended the relief from vehicle registration tax on electric vehicles and reduced rates for hybrid vehicles. The cycle to work scheme, which I continue to support, uses the tax system to encourage commuters to cycle to work instead of driving.

There are other considerations to be aware of when deciding whether to apply increases to the rate of excise on diesel. Diesel is the fuel of business and increasing its price increases the cost of doing business in the State and impacts on our overall competitiveness. Bearing this in mind, the rate of excise on diesel is lower than the rate of excise on petrol. Having different excise rates for petrol and diesel is the standard practice across the majority of member states of the European Union, and the difference between the respective rates in Ireland is in line with the EU average.

In April of this year, the National Competitiveness Council published a report entitled Cost of Doing Business in Ireland 2015, which indicated that diesel in Ireland is 5.5% more expensive than the average in the euro area. The overall tax on the price of diesel, at 60.3%, is the third highest in the euro area. The report states this has an impact on competitiveness. The Deputy will be aware, therefore, that a balance needs to be struck in this matter. The excise rate on diesel is considered annually in the context of the budget and I, as Minister, consider all the benefits and impacts when setting the rate.

The policies in place are working. The environmentally based vehicle registration tax and motor tax have resulted in a move to vehicles which produce fewer emissions. Ireland's rate of excise on diesel is high to discourage its use as much as possible. However, it is important to consider that diesel is the fuel of business and is already more expensive here than in many of our European competitors.

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