Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

As the Deputy is aware, it is a long-standing practice of the Minister for Finance not to specifically comment on individual measures that may be part of the budget. With regard to kerosene used for home heating purposes, mineral oil tax and VAT at a rate of 13.5% are applied. Kerosene is also subject to the National Oil Reserves Agency, NORA, levy at a rate of 2 cent per litre. Mineral oil tax comprises a carbon and non-carbon component, as the Deputy is familiar with. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as fuel duty, fuel excise or fuel tax. Both the carbon and non-carbon components are excise. With regard to the application of mineral oil tax on kerosene used for home heating, the non-carbon component is zero and only carbon tax applies. The current rate of carbon tax is €48.50 per tonne of carbon dioxide emitted. For supplies of kerosene used for home heating, this equates to a charge of €122.83 per 1000 Litres or approximately 12 cent per litre. The 2020 programme for Government committed to increasing the amount charged per tonne of CO2 emissions from fuels to €100 by 2030. The Government followed through on this commitment by introducing legislation in the Finance Act 2020 to provide for a ten year trajectory for carbon tax increases to achieve this objective. This measure is a key pillar underpinning the Government’s Climate Action Plan to halve emissions by 2030 and reach net zero no later than 2050.

A further key component of the Government’s carbon tax policy is the allocation of revenues raised from these rate increases to fund just transition measures. It is important to note a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society, but in the long term provide support against fuel price impacts by reducing our reliance on fossil fuels. With regard to VAT applied to kerosene used for home heating, it is important to note the Government has very little flexibility on kerosene from a VAT perspective. This is because it is subject to a VAT rate of 13.5% which is provided for by way of a historical derogation that allows us to maintain reduced rates to certain supplies under the VAT directive. These are known as parked rates and cannot go below 12%. If we were to reduce kerosene to 12%, the saving would be relatively small - approximately €20 per 1000 litres - but there would be a considerable additional cost to the Exchequer, approaching €900 million in total.

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