David Stanton (Cork East, Fine Gael)
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Question 7: To ask the Minister for Finance with regard to the taxation of diesel, if he will consider or has considered the introduction of specific measures to support the haulage industry, as per section 19 of EU Council Directive 2003/96/EC; and if he will make a statement on the matter. [19257/12]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy may be aware that a working group was set up between officials of my Department, the Irish Road Haulage Association, IRHA, and some Members. The working group is discussing several issues of concern to the haulage industry. The Deputy will understand that I cannot pre-empt the outcome of these discussions, which are ongoing. A fuel rebate system, as sought by the IRHA, could not under EU law be restricted to Irish licensed hauliers but would have to be extended to all vehicles intended exclusively for the carriage of goods by road with a maximum permissible gross laden weight of not less than 7.5 tonnes. In addition, the rebate would have to include the carriage of passengers by a motor vehicle of category M2 or category M3 as defined in Council Directive 70/156/EEC.

David Stanton (Cork East, Fine Gael)
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I thank the Minister for his response. The question was prompted by a call from an owner of a haulage business who employs more than 50 people. He has informed me that he will have to let them all go shortly because the pressure of costs is becoming unbearable. He cited problems with washed diesel undercutting his business as well. He said he would not have contacted me except that the matter was most urgent. He said his business is on life support. Is it possible for the Minister to give any indication of when the working group will finish its deliberations? When will it be in a position to report? Does the Minister have any information on the impact on the haulage industry caused by the high price of diesel and the illegal washed diesel on the market?

Michael Noonan (Limerick City, Fine Gael)
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It would be a mistake to time-limit discussions of a working group so I will not put a time limit on it. However, there appears to have been a good exchange of views to date as well as serious discussions on the proposals made by the Irish Road Haulage Association. Irish hauliers are impacted in the same way as those throughout Europe. Diesel and petrol prices have gone up throughout Europe. In comparison with our nearest neighbours in the United Kingdom the imposition of excise on diesel and petrol in Ireland is significantly lower. VAT on diesel and gas can be reclaimed while VAT on petrol cannot be reclaimed by hauliers but most of the lorries use diesel. The option to reclaim is available. The argument that an increase in the VAT rate is having an added imposition is questionable. Perhaps there is an imposition on cash flow but not on the bottom line because those involved can reclaim it.

It is a competitive business. At the same time there is a good deal of extra business because of the increase in exports. There is a good deal of hauling to the ports and into Europe but it is competitive business. Those who require the services of hauliers have cut margins because it is so competitive. The talks are ongoing.

David Stanton (Cork East, Fine Gael)
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I thank the Minister for his comments. I imagine the Minister will agree that this is an important business and that many of our exports depend on it. They are also competing with companies that have their origins in other EU countries. Will the Minister comment on the phenomenon of washed diesel? What is the extent of it? What is it costing the Exchequer annually?

Michael Noonan (Limerick City, Fine Gael)
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It is difficult to say what it is costing the Exchequer annually but certainly there is widespread abuse. The Deputy will recall that I took measures in the Finance Bill to ensure there will now be full traceability of diesel and petrol from the point of import through to the point of sale. Previously a licensing system was in place if one was providing diesel to pumps. However, if one had a business in which one was providing central heating diesel or green diesel to the farming community, no licensing was required. The was a gap in the traceability and that gap has been filled in by the Finance Bill. The Revenue requested this and suggested that it was an important measure to crack down on the laundering of diesel.

Michael McGrath (Cork South Central, Fianna Fail)
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I wish to bring up a related point and broaden the issue to ordinary consumers and motorists. The price at the pumps has reached a crippling level of approximately €1.70 per litre of petrol. Since VAT is the last element to be added to the price - it is applied to the excise-inclusive price of diesel and petrol - it is yielding a windfall for the Exchequer. Does the Minister have any plans to examine the issue and give some relief to motorists who are dealing with exorbitant fuel prices at present?

Michael Noonan (Limerick City, Fine Gael)
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This came up in Europe in the crisis in 2004 and again in 2007 and 2008. There is agreement throughout the community that when there are spikes in the price of transport fuels Governments will not alter the taxation element. What the Deputy is saying about VAT is correct, namely, that it applies to the total price. However, the increase from 21% to 23% at budget time, with petrol selling at approximately €1.50 per litre, amounted to an add-on of approximately 3 cent. I accept that this goes on the total price at the end, so it is more like €1.70, but the point is that the spike is not due to tax increases. We imposed no excise increase on diesel or petrol in the last budget. There was a 2% VAT increase and a €5 carbon charge per tonne, which equated to approximately 1.5 cent on a litre. Rather than tax increases, it is international events, in Iran and in the Middle East in general, that are driving the cost of fuel. There is a spike at present and it is very difficult for people. It should also be noted that there is no windfall for the Exchequer as a result of these increases. What happens is that people who have to use their car to get to work will make savings elsewhere. In other words, they are spending more on fuel and less on something else. While the Exchequer takes an additional amount on VAT from fuel, it loses VAT on other parts of the spending profile.