Denis Naughten (Roscommon-South Leitrim, Independent)
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Commuters, small businesses, hauliers, farmers and families are now are being screwed by the rise in fuel prices for diesel, petrol and home heating oil. The cost of filling an average car is approximately €112, which is making life extremely difficult for a great number of people. The Government is making a windfall from price increases, as it takes in excess of one cent for every five cent increase in the fuel prices. At current rates the projection is that the Government will take in an extra €64 million in VAT because of the price increases. However, to date there has been an outright rejection by Government of any proposal to assist those who are struggling to put fuel in their car to get to work to pay for the septic tank charge, the household charge, the forthcoming water charges and the forthcoming property tax, never mind the small little issue of paying the mortgage on a house that is in negative equity.

I acknowledge that international influences have forced an increase in the price of fuel on a worldwide scale but the domestic price of fuel has now reached an unsustainable level for many families. In March 2012 fuel price inflation in the United States reduced by 4.3% yet in Ireland in the same period we have seen an increase in the price of fuel of 8.7%.

Crude oil prices are now at a much lower than they were in July 2008 but the cost of fuel in Ireland is much higher and the cost of keeping a car is climbing on a daily basis. In July 2008 when oil prices peaked, a litre of petrol here cost €1.36, which is 34 cent less than it costs today.

I am aware the Irish Road Haulage Association, has proposed a fuel rebate scheme for excise. I understand a working group has been established between the IRHA and the Department of Finance to discuss this matter and I hope the Minister can outline the progress in those talks to date.

We cannot ignore the fact that the price of petrol and diesel consists mainly of taxes levied by the Government, including excise, VAT and the carbon tax. That is in no small way facilitating the fuel laundering industry that we have seen develop here in recent years. There were a number of instances of fuel laundering in my constituency and in adjoining constituencies last year. That trend is continuing this year, with fuel laundering becoming a major factor and problem in the economy. It is taking money out of our economy, out of the Exchequer, and forcing the Government into a situation where further taxes have to be increased. That also needs to be addressed.

According to AA Ireland, the average motorist will require 150 litres of petrol per month which, at a rate of €1.70 per litre, costs each motorist €255. The bulk of this goes in Government taxes. In fact, it is €1,628 per annum in tax alone. We cannot ignore the impact this is having on the spending of individuals, the price of goods and the cost of doing business.

Higher fuel costs impose a greater financial burden on the poor relative to the rich. They are least able to afford the cost involved in a changeover to more energy efficient fuels. The bad news is that things are likely to get worse, with some forecasters predicting the cost of a litre of petrol could hit €2 by the end of the year, delivering a windfall in fuel tax revenue.

Rather than using the taxation system to run the economy into the ground, I am appealing to the Government to use the extra VAT generated from increasing fuel prices to reduce the overall cost of petrol and diesel. The Exchequer would be no worse off, but it would help struggling families and the economy.

John Perry (Sligo-North Leitrim, Fine Gael)
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I am pleased to take the opportunity to speak on matters relating to the high cost of fuel on behalf of the Minister for Finance. In this regard, Ireland, like other countries, has experienced a significant increase in the cost of petrol and auto-diesel in recent years. The increase in fuel prices is an international phenomenon. Fuel prices are driven by a number of factors, including the price of oil on international markets, exchange rates, production and refining costs. The rise in oil prices in recent periods reflected additional factors such as geopolitical uncertainty in northern Africa and the Middle East, with potential supply disruptions. For example, the average price of auto-diesel in 2010 was €1.23 per litre compared to today's average price of €1.61 per litre, a difference of 38 cents per litre. During this period increases in excise in the budget last year and carbon tax in the budget for this year raised excise on auto-diesel by just over 3.5 cents per litre, VAT inclusive. The increase in the price of auto-diesel, therefore, is largely due to external factors outside the Government's control.

The excise rates, including the carbon charge, in Ireland on motor fuels are 58.8 cent on a litre of petrol and 47.9 cent on a litre of auto-diesel. When VAT is taken into account, the total Exchequer take as a percentage of the total price is 53.7% and 48.5%, respectively, based on current average prices of €1.68 and €1.61 per litre for petrol and auto-diesel respectively. While the tax increases are within the control of the Government, these increases must be seen in the context of very difficult budgetary decisions. Nevertheless, it should be noted that our rates remain lower than those of many of our main trading partners and significantly lower than those of our nearest neighbour, Britain. The price of auto-diesel is around 20 cents per litre cheaper in the State compared to that in Britain, while the price of petrol is around 10 cents per litre cheaper.

The Exchequer yield from excise, as excise is set at a nominal amount, does not increase as the price of fuels increase. On the other hand, the yield from VAT per litre of fuel, as VAT is set as a percentage of the price, increases as the price of fuels increase. Accordingly, any increase in the tax take as a consequence of increasing fuel prices is confined to VAT. It should also be noted that businesses are, of course, entitled to reclaim VAT incurred on their business inputs, including VAT incurred on fuel. For example, VAT incurred on auto-diesel and marked gas oil, or green diesel as it commonly known, used in the course of business is a deductible credit for business in the Irish VAT system. VAT on petrol cannot be deducted or reclaimed.

Given the current pressure on the public finances, there are no plans for temporary taxation adjustments, as to do so could lead to significant costs to the Exchequer. In the Minister for Finance's Budget Statement in December he pointed out that the programme for Government stated there would be no increases in income tax. The Government carefully considered the options open to it, given our commitments under the EU-IMF programme. Indirect taxes have a lower impact on economic growth and jobs. The decision to increase the carbon tax by €5 per tonne meant a lower increase across all fuels than if an increase had been applied just to the excise duties on petrol and diesel.

Rising costs of fuel are an international phenomenon. In 2005 and again in 2008, when oil prices last spiked, the matter was considered at ECOFIN. Given impact of high oil prices on growth rates, it considered an appropriate policy response to the price increase at its meeting of 3 June 2008. It confirmed the agreement reached in Manchester in 2005 that the discretionary fiscal and other policy interventions that had prevented the necessary adjustments by economic agencies should be avoided. On 15 March 2011 the issue of rising fuel prices was briefly discussed by EU Finance Ministers and they reconfirmed the approach taken in 2005 and 2008.

Denis Naughten (Roscommon-South Leitrim, Independent)
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I ask the Minister of State to update me on what is happening in the case of the road haulage industry. What is the position on fuel laundering? There are cowboys who are running riot in this industry. Each tanker of fuel costs the Exchequer €20,000. As the fine is just over €126,000, with six loads, the launderers have already made a profit. Securing a conviction in the first place is difficult. Does the Minister of State agree that this must be tightened, with a stronger approach being taken to fuel laundering? If fuel prices are maintained at current levels for the rest of the year, the Government will take in an extra €64 million in VAT. It will argue that as fuel prices increase, consumer demand is dampened and that, therefore, there is no net benefit to the Exchequer. Higher fuel prices, however, have an impact on disposable income and consumer demand; therefore, the opposite is also the case. While there would be no substantial impact on the overall tax take for the Government, the benefit for the economy would lie in taking that €64 million and including it in a refund system for consumers. The money would be spent on consumer goods in the economy, helping to support existing jobs. It makes more sense to support jobs rather than balancing the books and taking the easy option, leaving people and families struggling.

John Perry (Sligo-North Leitrim, Fine Gael)
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In addition to the ongoing enforcement action, legislative changes that will enable more effective control in this sector have been included in this year's Finance Bill. They include the introduction of new licensing requirements for marked fuel traders. The new arrangements will, for the first time, require any person dealing in marked fuel to hold a licence for the purpose. The granting of a licence will be subject to tax clearance requirements and the applicant will have to show to Revenue that any conditions subject to which the licence may be granted will be complied with. Revenue will be empowered to revoke a licence. In parallel with the introduction of this new licensing system, the regulations that lay down the detailed rules and requirements in mineral oil matters are being reviewed. It is intended that the requirements for record keeping will be strengthened and that a new requirement to make periodic returns to Revenue will be introduced. All mineral oil traders, including traders in marked fuels, will have to make regular returns.

Steps are being taken, in close co-operation with the British authorities, to acquire a more effective fuel marker. Revenue is planning to go to the market shortly, with the British authorities, to seek a new marker. A good deal of preparatory research has been undertaken both here and in Britain and we expect to proceed with this project shortly.

The problem of fuel laundering and smuggling is a serious one and the extensive enforcement action being taken on an ongoing basis highlights Revenue's commitment to combat it. The new legislative steps being taken, together with the work being done on the development of a more effective fuel marker, will serve to enhance the effectiveness of this action.

With regard to alleviating the problems being experienced by the haulage industry, a working group was set up involving officials from the Department of Finance, representatives of the Irish Road Haulage Association, IRHA, and some Members of the Oireachtas. This working group is discussing a number of issues of concern to the haulage industry, and the Deputy will understand that I cannot pre-empt the outcome of those ongoing discussions. 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.

My final point relates to the gain of €64 million. The amount of money lost to the Exchequer as a result of fuel laundering is considerable, in excess of €250 million per year, and the Government is very conscious of that and the need to deal with it effectively. The gain is in excess of €1 million per week due to the increase in VAT, not in excise. The IMF restrictions and the fact that we are borrowing €41 million per day to run the economy show the scale of the challenge currently facing the Government. Any income to the Exchequer at present is being spent in a very effective way on behalf of the taxpayer, but we are under immense pressure to secure tax take at present. However, I accept the point made by the Deputy.

The Government is being very decisive on the fuel laundering issue. It is also conscious of the cost of doing business and the importance of lowering those costs. Being from a business background, I am aware it is important to reduce costs for people in the delivery trade. Hauliers are under huge pressure at present. The job of the Government is to reduce the regulatory and other costs of doing business and the Minister for Finance is very conscious of that in all the actions he takes that impact on the creation of jobs.