Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I thank the Ceann Comhairle for selecting this topic and appreciate that the Minister for Finance, Deputy Michael Noonan, is present to respond to it.

As a Border county Deputy representing the counties of Cavan and Monaghan, I have a particular concern about the smuggling of fuel across the Border, not just diesel and petrol but also solid fuels. Alcohol, tobacco and a range of other products are also being smuggled across the Border. Unfortunately, that black economy is thriving and it is doing untold damage to our revenue base.

Domestic solid fuel in the North is already cheaper due to a 5% VAT rate, compared to a 13.5% VAT rate here, and an exemption from the British Government's climate levy. However, as announced in the budget in December, the carbon tax has been extended to solid fuels. A rate of €10 per tonne has now been applied with effect from 1 May, and a rate of €20 per tonne will be applied with effect from 1 May next year. I understand that is the current proposal. According to the industry, by next year that will add €2.50 to a 40 kg bag of coal and 50 cent to a bale of briquettes. A household that goes through two bags of coal a week for half of the year - which is not unusual, particularly for those houses without central heating - will pay an extra €130.

Introducing these phased carbon tax increases on solid fuels without considering their impact on poorer families and the increasing incidence of fuel smuggling is not a good example of joined-up thinking by the Government. A number of years ago when the carbon tax was first introduced, the intention was that it would not be applied to solid fuels - namely, coal and turf - until there was practically an equivalent price north of the Border. That is not the position at the moment. I know some fuel traders who are very concerned about the possible impact on the trade south of the Border due to the price differential resulting from the imposition of the extra tax. I raised this issue during the Second Stage debate on the Finance Bill and I hope the Minister will be in a position to address it. Fuel merchants have pointed out to me and many other public representatives that smuggling and the potential for further losses in the trade means they may have to let employees go, with a resultant loss of income tax, PRSI and other revenue to the Exchequer.

When the introduction of a carbon tax was first mooted in 2009, the solid fuel trade group, the industry's representative body, stated: "The proposed carbon tax would introduce a 22.5 per cent wholesale price disadvantage to Republic-based coal distributors - with the end result being the complete domination of the solid fuel trade in the Republic by coal from Northern Ireland." The group's spokesman at that time said there was evidence of coal being smuggled as far south as the Minister's province of Munster.

From an environmental point of view, it is worth noting that Scottish coal has a relatively high sulphur content, nearly three times the maximum allowed in the Republic. The industry has estimated that smugglers could make €2,500 to €3,000 per truck bringing in smuggled coal. We already know the massive profits that are made from well-organised smuggling of diesel and cigarettes and the activities, which we all find despicable, that are often funded from these operations. It seems we are now going to give even more opportunity to the same people so that they can make money and in the process deny the State millions of euro in revenue.

The Minister for the Environment, Community and Local Government yesterday announced his decision to press ahead with a nationwide ban on smoky coal. There will be benefits from that decision but there will be an additional dimension in terms of costs for consumers.

Representations have been made directly to me by many small-scale fuel merchants who are concerned that they will have severe difficulty remaining in the trade, particularly those in the three Southern Border counties, those along the Border and those even further south. I ask the Minister if something can be done to ensure that revenue is not lost to the State and that everything possible is done to protect that trade and the resultant jobs.

Michael Noonan (Limerick City, Fine Gael)
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The Revenue Commissioners are responsible for the collection of the solid fuel carbon tax. This tax was introduced with effect from 1 May 2013 and will be collected on a self-assessed basis. In line with its approach generally, the Revenue Commissioners will apply the full range of compliance interventions and enforcement provisions for self-assessed taxes to the solid fuel carbon tax.

The tax is payable on the first supply in the State and will therefore be paid by importers and manufacturers at the earliest point possible in the domestic supply chain. Retailers that source their fuel from distributors in the State will not be making a first supply in the State and therefore will not be required to register for the tax. However, if a fuel trader or retailer receives some or all of its solid fuel supplies from a supplier based in another member state - for example, a supplier based in Northern Ireland - that fuel trader or retailer will be accountable for the tax when it supplies the fuel onwards to its own customers.

If a supplier based in Northern Ireland is supplying households here directly, that supplier will be making a first supply in the State and must register for the carbon tax and make payment of the tax on its supplies to the Revenue Commissioners. In circumstances in which there are grounds to believe that tax has not been paid in respect of a taxable supply of solid fuel, the Revenue Commissioners will investigate the person's tax liabilities in accordance with the particular circumstances of each case. If confirmed, it will enforce the collection of any unpaid carbon tax and other taxes, such as VAT.

A tax liability does not arise where an individual personally purchases and brings into the State solid fuel from a supplier in another member state, provided the fuel is for his or her own private use. However, should that individual, instead of using it him- or herself, supply another person in the State with that fuel, he or she will have made a first supply of solid fuel in the State as a supplier, will be liable to pay a solid fuel carbon tax on that supply, and must register with the Revenue Commissioners accordingly.

It is important to note that the solid fuel carbon tax will become operational in a market that is already subject to strict regulation. Regulations to enable local authorities to control the type of coal supplied in the State have been put in place as part of the robust mechanism introduced by the Minister for the Environment, Community and Local Government to address the risk of coal products with lower environmental standards, and on which carbon tax has not been paid, being sourced from Northern Ireland. Suppliers who are producing and supplying solid fuel unlawfully are subject to investigation and prosecution by local authorities and other State agencies charged with enforcing environmental regulations and preventing such supply. The Revenue Commissioners will liaise with these bodies as required to ensure lawful supplies of solid fuels are properly taxed.

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I thank the Minister for his reply. I compliment the Revenue Commissioners on the excellent work they have been doing in recent years to deal with the scourge of washed diesel and the illicit trade in diesel, in particular, but also in tobacco products. I know from speaking to those officials that they are dealing with a very difficult issue and have made substantial progress, which we welcome. We want to ensure that type of illicit trade is eliminated as far as is practicable. Being realists, we know that it is not possible for the Revenue Commissioners or any State agency or its officers to police on an ongoing basis the Border areas in the constituencies that the Minister of State, Deputy McGinley, and I represent.

In his concluding sentence, the Minister said that the Revenue Commissioners would liaise with the bodies to which I referred. One of the fuel merchants made the point that they need assurance that there will be good policing in the new situation that has arisen with regard to solid fuels. Co-ordination is needed to ensure that if there is a marked decrease in the legitimate sale of products south of the Border, some action will be taken to deal with the illegal supply. When the Minister is planning the budget, I ask him to consider not applying the increase proposed for May 2014, because the British Government has not yet indicated whether its carbon charge will apply to solid fuel products in the North of Ireland. We need to plan as much as possible for the difficulties that will arise for this business south of the Border too.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy has raised three issues in his supplementary question, one of which was the level of enforcement by the Revenue Commissioners and how they will co-operate with other authorities. They have assured me that they are intent on rigorous enforcement using all the powers under the tax Acts and that they will liaise with other authorities. The second issue is the high sulphur content of some coals that come from Northern Ireland, particularly if they are sourced in Scotland. There are regulations already promulgated by the Department of the Environment, Community and Local Government and enforced by local authorities to do with the quality of solid fuel burned, particularly coals with high sulphur contents. They will continue their enforcement as they have been doing up to now but they will cross-refer anything they do to the Revenue Commissioners, which will be in contact with the local authorities to see if enforcement is required or if there is a trail that can be followed to source smuggling from Northern Ireland.

The third question is a budgetary matter. When I extended the carbon charge to solid fuels I said we would bring in only 50% of the tax this May, with the other 50% to be brought in next May. However, we do take cognisance of what the British authorities are doing in Northern Ireland because we do not want legitimate trade to evaporate across the Border because of price differentials.