Damien English (Meath West, Fine Gael) | Oireachtas source

I thank Deputy Kenny for raising this important issue. As he correctly said, it is an issue in many parts of the country, including his area of counties Leitrim and Sligo and my own area of County Meath. Farmers, like anybody in business, are under extreme pressure with the price of energy, the price of fuel and the prices in general. The Deputy is right that there have been some good times, given the recent increases in the prices they get for their own products. However, those increases have been a long way off from being double, which is what the farmers are having to pay for fertiliser, foodstuffs or energy.

There is pressure on the agricultural sector. There is no doubt about that. It is an important sector to Ireland. We want to protect it and to continue to work with it. When we came out of the last financial crash, we saw that agriculture and food production were major assets to this country. They are playing a major role in the current jobs-led recovery too. We want to work with this valuable sector and to address some of the costs pressures it is under.

The Minister, Deputy Donohoe, could not be here today. I will give the answer on his behalf and on behalf of his Department. The Government understands the background to this Topical Issue matter and recognises that there is a real issue with the rising cost of fuel for the agricultural sector, as Deputy Kenny and others have genuinely raised. However, it has to be stated at the outset that we are living in unprecedented times. While the Government is doing everything within its power to assist the economy as a whole, including the agriculture sector, there are limitations to what it can do. In other words, it cannot completely insulate completely sectors of the economy from the impact of issues such as the war in Ukraine, which are completely outside of its control.

As regards the application of excise on agricultural fuels, the Finance Act 1999 provides for the application of excise duty in the form of mineral oil tax, MOT, to specified mineral oils used as motor or heating fuels. MOT is comprised of a non-carbon component and a carbon component. The carbon component is commonly referred to as carbon tax. The non-carbon component is often referred to as excise, fuel excise or fuel duty.

Diesel used for certain purposes, for example in agricultural machinery, may qualify for a reduced rate of MOT. Such diesel must be marked with prescribed fiscal markers and is referred to as marked gas oil, MGO, green diesel or farm-agricultural diesel. The current reduced rate of MOT that applies to MGO is €111.14 per 1,000 l. This is considerably less than the standard rate of MOT on diesel used as a propellant which is currently €405.38 per 1,000 l.

In March of this year, in response to the global fuel crisis, the Minister for Finance introduced cuts to MOT rates on petrol, diesel and MGO. He introduced a further cut to the MOT rate on MGO from 1 May to run until 11 October this year. This rate cut applies to the non-carbon component of MOT and fully compensates for the carbon tax increase. As a result of the measures introduced, all MGO users benefit from a cut of more than 5 cent per litre inclusive of VAT from 1 May until 11 October. In addition to benefiting from the reduced MOT rate on MGO, farmers may also claim a tax deduction for expenditure incurred on MGO.

In computing their taxable farming profits, farmers may also benefit from a relief provided under section 664A of the Taxes Consolidation Act 1997. This relief allows a farmer to claim an additional deduction for MGO, which amounts to the difference between the carbon tax charged and the carbon tax that would have been charged had it been calculated at the rate of €41.30 per 1,000 l of farm diesel, which was the 2012 baseline figure.

It is also worth mentioning that the MOT law provides for a relief from the carbon component of MOT for biofuels that are made of biomass of animal or vegetal origin. This means that a fuel that is entirely made from biomass would be liable for the non-carbon component of MOT only. In the case of such a biofuel used in place of MGO, the MOT carbon component would be fully relieved. For blended fuels containing biomass, the relief applies to the portion of fuel that meets the biofuel criteria set out in the MOT legislation. The biofuel relief is intended to promote a higher level of biofuel in fuel sales and supports the Government's commitment to incentivising the use of greener alternatives to fossil fuels.

In conclusion, and in response to Deputy Kenny’s questions, the Government will continue to engage with all our stakeholders and to work with our European partners to respond to this crisis, using all of the tools at our disposal. There will be more initiatives brought forward in the summer and in the budget.

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