Ann Phelan (Carlow-Kilkenny, Labour)
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I thank the Ceann Comhairle for facilitating my request for a discussion on the topical issue of fuel laundering. I have tried to raise the matter on several occasions.

The criminal activity of adulterating motor fuel is a threat to public health and safety, the environment and the vehicle engines of unfortunate victims as well as the cause of a serious tax loss to the Exchequer. It is time to seek an end to the practice of fuel laundering. I will take this opportunity to explore the possibility of developing an alternative method of protecting the fuel subsidy to farmers, to assist them in their production of food, as well as the continued protection of established, legitimate users of tax rebated fuels, such as home heating oil users.

From the details already published of seizures of laundered goods and equipment this year, it is obvious that illegal tampering with marked gas oil is increasing. I urge that there be cross-Border support on this issue, as has been the case in the past. I raised this issue at the British-Irish Parliamentary Assembly as it is an extensive problem in the North as well. In a recent joint Garda, Criminal Assets Bureau, CAB, and customs and excise raid on a laundering plant in co-operation with the Police Service of Northern Ireland, PSNI, it was estimated that the plant was capable of supplying diesel to ten busy service stations for a full year. Any seepage of fuel residues or chemical bleaching agents from this plant into the ground would have had widespread and serious consequences for humans, animals and the environment.

At this stage we ought to be able to tackle this problem. There is agreement among the farming organisations that it is time to open a debate on this issue. The general consensus appears to be that the easiest way to tackle it is not to colour the diesel and provide a rebate to farmers.

Robert Dowds (Dublin Mid West, Labour)
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I thank Senator Denis Landy for asking me to raise this issue. In agreeing with my colleague, Deputy Ann Phelan, it is worth pointing out that the most obvious and effective change we could make is to harmonise the duties on green diesel, which is currently at 13.5%, and auto diesel, which is at 21%. Legitimate agricultural users could reclaim the payment at the higher level. This would do a great deal to recoup the approximately €150 million we are losing due to laundered diesel. I would be grateful if the Minister would deal with that issue.

On a related although not as important issue, if there is some reason this change cannot be introduced, it would be extremely useful if each petrol station had to display in an obvious manner the supplier of its fuel. If a problem emerges, therefore, there is a definite lead to follow in finding out who the original supplier is. Can anything be done to impose responsibility on the relevant petrol stations to repair cars that have been damaged? I look forward to the Minister's response.

Fergus O'Dowd (Louth, Fine Gael)
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I thank Deputy Phelan and Deputy Dowds for their views and proposals. I will bring them to the attention of the Minister.

I am pleased to take this opportunity to speak on behalf of the Minister for Finance on the subject of fuel laundering. This form of tax evasion is a matter the Government takes very seriously, particularly given the current economic climate. I am informed by the Revenue Commissioners that the predominant illicit activity in the mineral oil area in Northern Ireland and the Republic is the laundering of marked diesel. In both jurisdictions the respective difference in excise rates between marked or rebated and normal diesel offers a considerable incentive for oil laundering and this illicit activity poses a serious threat to the exchequers, economies and environment on both sides of the Border.

Marked gas oil or marked diesel is subject in the Republic to mineral oil tax at the rebated rate of €88.66 per 1,000 litres, on condition that it is used for particular purposes such as home heating or as a propellant in agricultural and off-road vehicles. Its use in ordinary road vehicles is strictly prohibited and there are heavy penalties for anyone convicted of such an offence. The rate for normal auto diesel is €465.70 per 1,000 litres. In addition, marked gas oil is subject to a lower VAT rate of 13.5%. The resulting total tax differential is around 50 cent per litre, which is very significant.

The Revenue Commissioners, who are responsible in the Republic for the collection of mineral oil tax and the control of mineral oils, are very aware of the threat posed by laundered fuel and undertake a multi-faceted programme of enforcement action to counter it. It will be appreciated that it is not possible to accurately estimate the loss to national exchequers either in the Republic or in Northern Ireland from individual activities within the shadow economy but obviously it is significant. It is important to note that marked gas oil usage is not unique to farmers. It has a wide range of legitimate uses, such as in commercial and domestic heating systems, ships, fishing boats, trains, certain vehicles designed for specific off-road use, machinery used mainly in the agricultural and construction sector and electricity generators.

One of the alternative methods envisaged by the Deputies involves a move towards a system of repayment whereby certain users would be given refunds relating to non-auto use of mineral oils. However, it is not clear that this is a feasible option. It would involve the establishment of a very extensive repayment system which would give rise to a very significant administrative burden for the Revenue Commissioners, oil traders and users and would pose significant cash-flow implications for those who currently use marked gas oil. Repayment regimes are vulnerable to abuse and liable to be exploited by criminal elements, such as those currently involved in fuel laundering. A repayment scheme would not eliminate the incentive to divert rebated oil to high-rate auto use and could give rise to large-scale bogus claims. Illicit use would be difficult to detect and almost impossible to prove. Even if the oil that benefits from repayment is marked, it can still be laundered as at present. In addition, oil can be laundered from UK marked gas oil. Therefore, a move away from marking could only be considered if the UK were to do likewise.

For these reasons, it is not clear that a repayment system would be less susceptible to fraud. The Revenue Commissioners' intention is to continue to ensure that controls relating to the sale and distribution of oils and enforcement action in combating illegal oil laundering activity are as effective as possible. There has been ongoing extensive enforcement action, which has led to the detection of oil laundries and the prosecution of the individuals and companies involved. As the Deputies are aware, substantial action has been taken by the Garda and law enforcement agencies north and south of the Border in the recent past.

Ann Phelan (Carlow-Kilkenny, Labour)
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The Minister's reply was comprehensive. I take his point about the rebate and the burden it could possibly impose. If we are losing a great deal of revenue, however, it might be cost neutral. I am also aware that an isotope can be added to the diesel which would allow for the detection of legitimate fuel in the engine. Perhaps that is another way to deal with the problem.

I believe this issue should be dealt with across the EU. There was a comprehensive report on the radio today which showed that this is a huge problem across the Balkans and a very significant problem in Greece. Moreover, it was reported today that Mr. Papandreou had been attempting to get reports on the magnitude of the difficulty in Greece. Given the difficulties faced by that country, I am sure they would welcome the recovery of all such Exchequer losses arising from fuel laundering, which might go a considerable distance towards plugging the large fiscal hole they have to plug. Consequently, there is much work to be done in that regard.

Robert Dowds (Dublin Mid West, Labour)
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I am somewhat disappointed by the Minister of State's response in that I consider the suggestion made by Deputy Phelan and me to be practical. If the estimate that €150 million is being lost is correct, it would hardly cost that amount to put in place a system of checks. However, if the Minister of State sticks to that view, my suggestion that each petrol station should be obliged to display clearly the source of its fuel would be simple enough to monitor. I welcome the successful activities of the Garda in bringing to book some petrol stations which deserved to be chased up. I await with interest the Minister of State's response to that suggestion and whether there is any way in which rogue petrol stations can be forced to pay for the damage they do to people's cars.

Fergus O'Dowd (Louth, Fine Gael)
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I again wish to agree with both Deputies that this issue is serious and must be dealt with. Obviously, the notes I have to hand were written before I heard what the Deputies had to say, but I will bring their comments directly to the attention of the Minister concerned as they make a lot of sense. Deputy Dowds made an important point on traceability and accountability and the fuel's origin being visible in a clear and obvious place. As for Deputy Phelan's point on the possible addition of an isotope, if this makes sense, I see no reason it should not be done.

I wish to make a brief final point on cross-Border co-operation. A cross-Border co-operation fraud enforcement group is highly active. The group comprises HM Revenue & Customs, the United Kingdom Border Agency, the Police Service of Northern Ireland, the Serious Organised Crime Agency and the Northern Ireland Environment Agency representing Northern Ireland, as well as the Revenue Commissioners, An Garda Síochána, the Criminal Assets Bureau and the Department of the Environment, Community and Local Government. Since 2008, it has met a total of 13 times and, as can be seen through the court proceedings, it is taking a lot of focused action. However, this is an extremely important issue that will not go away until it is dealt with effectively both in respect of penalties and transparency of fuel origin. Moreover, if it is possible to incorporate the additive as suggested by the Deputy, this should be done.

Robert Dowds (Dublin Mid West, Labour)
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May we receive a further report on that matter?

Fergus O'Dowd (Louth, Fine Gael)
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Yes, I will ask the Minister to so do.