Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Ireland’s excise duty treatment of fuel used for motor and heating purposes is based on European Union law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the energy tax directive.

Mineral oil tax is an excise duty comprised of carbon and non-carbon components. The carbon component is often referred to as carbon tax, but it is only one part of the overall tax that applies to mineral oils and other fuels used for motor and heating purposes. Mineral oil tax as applied in Ireland is subject to the requirements of the energy tax directive.

The main agriculture exposure to excise duty comes from the fuel inputs primarily through the use of marked gas oil, which is also commonly referred to as green diesel, farm diesel or agricultural diesel. Marked gas oil is currently subject to a rate of mineral oil tax of 11.8 cent per litre. This compares to the current full rate of mineral oil tax for auto diesel used as a propellant of 51.5 cent per litre.

Farmers and agricultural contractors who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.

Section 26 of the Finance Act 2020 increased the rate of carbon tax to €33.50 per tonne. This applied to transport fuels from midnight on budget night but in line with the policy approach applied in this area in recent years, I delayed its implementation on all other fuels, including marked gas oil, until 1 May, after the winter heating season. This was not an exemption of marked gas oil from the budget 2021 increase. It was a repeat of what we did in previous years. I remain committed to the plans I outlined in the Finance Bill.

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