Tuesday, 8 October 2019
Financial Resolutions - Financial Resolution No. 1: Tobacco Products Tax
(1) THAT for the purposes of the tax charged by virtue of section 72 of the Finance Act 2005 (No. 5 of 2005), that Act be amended, with effect as on and from 9 October 2019, by substituting the following for Schedule 2 to that Act (as amended by section 34 of the Finance Act 2018 (No. 30 of 2018)):“SCHEDULE 2
Rates of tobacco products tax
(With effect as on and from 9 October 2019)
Description of Product Rate of Tax Cigarettes Rate of tax at—
(a) except where paragraph (b) applies, €346.04 per thousand together with an amount equal to 8.91 per cent of the price at which the cigarettes are sold by retail, or
(b) €395.05 per thousand in respect of cigarettes sold by retail where the rate of tax would be less than that rate had the rate been calculated in accordance with paragraph (a).
Cigars .... .... .... .... .... .... .... .... Rate of tax at €394.811 per kilogram. Fine-cut tobacco for the rolling of cigarettes .... Rate of tax at €379.831 per kilogram. Other smoking tobacco .... .... .... .... .... Rate of tax at €273.903 per kilogram.
(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).
Financial Resolution No. 1 provides for excise duty increases on tobacco products, with effect from 12 midnight tonight. The increase amounts to 50 cent, inclusive of VAT, on a pack of 20 cigarettes in the most popular price category, together with pro rata increases for other tobacco products. The price of a pack of 20 cigarettes in the most popular price category, assuming the full increase is passed through to the final retail price, will increase to €13.50. The excise duty component of the price will be €8.12 and the total tax, inclusive of VAT, will be €10.64, which represents 79% of the price of a pack. The pro rata increase on the price of a typical pouch of roll-your-own tobacco will increase by 70 cent to €17.70. Ireland is committed to a policy of high taxation on tobacco to encourage people to quit smoking, particularly younger people. I am pleased to say this policy is working. In 2007, a total of 24% of our people were daily smokers. By contrast, the Healthy Ireland survey figures for June 2018 show that the figure has fallen to 18%. There are now more people in Ireland who have quit smoking than who smoke. Increasing tobacco product taxation is a key public health policy measure to continue the downward trend in smoking rates in Ireland and to help us achieve our goal of having a tobacco free Ireland by 2025. In respect of revenue raising, the increase in tobacco product tax and the minimum excise duty is estimated to contribute €57.1 million in a full year.
Financial Resolution No. 2 provides for an increase in the carbon charge component of mineral oil tax on petrol and auto diesel, with effect from 12 midnight tonight. The increase amounts to €6 per tonne of carbon dioxide emissions. Assuming the full increase is passed through to the final retail price, this will result in a VAT inclusive increase of €0.017 on the price of 1l of petrol and €0.020 on the price of 1l of auto diesel. Carbon tax was introduced on a phased basis in 2009, which is important to state. Since its introduction, carbon tax receipts have grown, broadly mirroring the overall economic recovery in Ireland. In order to meet climate change targets, there have been calls for a long-term strategy to increase the carbon tax rate to €80 per tonne of CO2 by 2030. The current rate of €20 has been place since 2012. There is a commitment in the climate action plan to increase the carbon tax to at least €80 per tonne by 2030 and carry out a full assessment of the trajectory of increases over successive annual budgets.
The Joint Committee on Climate Action recommended this approach, subject to the examination of the social and economic impact of rate changes. Setting a long-term trajectory of price increments sends a clear price signal to consumers and production sectors. It will establish a time period for gradual investment in energy efficient measures. With regard to revenue raising, it is estimated that the increase in the carbon tax will contribute €90 million in 2020 and €130 million in a full year.
In supporting Financial Resolution No. 1, Fianna Fáil recognises the important role increases in excise duty play with regard to behavioural change in the consumption of tobacco and the associated cost to the Exchequer of treating those with tobacco-related illnesses. The increase proposed is a proportionate and progressive measure aimed at improving public health and reducing public spending on avoidable tobacco-related illnesses.
Fianna Fáil supports the carbon tax increase in Financial Resolution No. 2 from €20 per tonne to €26 per tonne. It is a moderate increase which is in line with recommendations made by the joint committee which suggests carbon charging must reach €30 per tonne by 2030. While Fianna Fáil supports the principle, we were adamant in pre-budget discussions with the Government and at the joint committee that the money raised, which will be approximately €90 million this year, is ring-fenced. It should be provided for in legislation that the money cannot go to the bottom line of the Exchequer. The suggestion in today's budget is that the money will be used to support households which are prone to fuel poverty and communities affected by the winding down of fossil-fuel power generation in the midlands, in particular by Bord na Móna.
It is imperative that the Government gives due recognition to the impact on communities in Clare where Moneypoint has already seen significant electricity-generation job losses. From its response, the Government is clearly not listening to its own members in Fine Gael who should be well aware that there has been a significant reduction in the number of jobs at Moneypoint in the last number of years, particularly in the last 12 months. There are independent contractors who are no longer employed and a redundancy scheme will see a reduction from 200 to close to 100 jobs. Communities in west Clare have been impacted very detrimentally and we need to see them supported in the Finance Act.
Sinn Féin will support Financial Resolution No. 1 but it cannot support Financial Resolution No. 2, which proposes an increase in the rate of carbon tax. We oppose the latter for the reason the Minister for Finance and his officials provided at joint committee hearings to the effect that the tax is regressive. It is not going to reduce carbon emissions. We have carbon taxes in the State already and they have not reduced emissions. These increases will make no contribution to the reduction of emissions. We should be honest with people that it is a revenue raising exercise involving a commitment from Fianna Fáil and Fine Gael to keep increasing the tax right up to 2030. The vast majority of people do not have energy alternatives and what we have heard proposed in the budget today will do nothing for the vast majority of families whose homes are heated by oil or gas. It will do nothing for people who live in rural areas and depend on cars. We do not have public transport for them, which is not something that is going to change for those families anytime soon. Certainly, it will not change under this Government with its lack of investment in those areas. It is a regressive tax. The Minister says he will delay some elements to do with fuels; for example the home heating increase will not be implemented until May 2020 or, to quote him, "until after the winter heating season". Cynics will say it has more to do with the date of the next general election. Whatever about the timing, the increases this year and those signalled for the next number of years represent Fianna Fáil and Fine Gael going again for a regressive tax which will disproportionately hurt those on low and middle incomes. It is not going to work. Sinn Féin supported the sugar tax and the plastic bag levy because people had alternatives which worked. This will not work.
The Labour Party supports Financial Resolution No. 1, the increase of 50 cent per pack of 20 cigarettes. We accept the view of the tax strategy group that it is unlikely to contribute a great increase in yield because the objective is to reduce demand rather than to get money. In this regard, however, I note that 13% of cigarettes consumed in the State now are illicit. We must be mindful of that. The higher the base price of the legal cigarette, the greater the incentive to smuggle tobacco. We must hear from the Minister that there are robust measures to tackle that. It is also the case that 9% of cigarettes consumed are legally imported by travellers and tourists, a rate which will probably increase. As long as the prices continue to rise, everyone will be asking people to bring them back. We must be mindful as we increase the base price that we are not simply giving our taxes to others and allowing smugglers to thrive.
The carbon tax increase is the first instalment of a trajectory agreed by the all-party committee. While the Labour Party supports it, we want to see clear mitigation measures in line with the joint committee's recommendations. Bluntly, we have not seen those today. We will give the Government some leeway to spell out exactly how it intends to combat fuel poverty. Bluntly again, not having any base rise in social welfare today and not doing anything to implement the recommendations on the minimum wage do not augur well for the Government's view on mitigating poverty, in particular fuel poverty.
I do not support the increase in the price of cigarettes and tobacco even though I do not smoke myself. It is very hard to place an extra cost on people who have to smoke. There are many elderly people who were smoking before any education was available on the effects of cigarettes and it is impossible for them to give up now. This increase will not encourage them to stop and it is not the way to go. It should be education, education and education. I do not like smoking myself and it hurts to see young people doing it. However, this is not the way to go. Tobacco is expensive enough as it is and pensioners got no rise in the budget. As such, this is very unfair.
My views on carbon taxes are well known. There was already a carbon tax on fuel. Diesel is now going up to €1.50 a litre, which is an excessive cost that people will not be able to bear. Working people and people in rural Ireland have no other way to travel but by car or the SUVs that farmers need so much. There is no sound alternative at present. As such, I will call for divisions on both resolutions.
As regards Financial Resolution No. 1, I ask the Minister for Health to consider the excessive cost of nicotine replacement therapies, including chewing gums and lozenges. There are many people who are not on the medical card scheme and wish to give up smoking through the use of alternative sources of nicotine as they wean themselves off the product. However, the cost of these products is excessive. I ask the Minister to consider reviewing the cost of those products for which pharmaceutical companies are charging an arm and a leg.
The joint committee has done a good job over the last year. One of the key recommendations on which all members agreed was the need to analyse how the introduction of any carbon tax could be progressive rather than regressive. That involved two requests which, unfortunately, were not met. The first was the carrying out of a fuel-poverty study by the Department of Finance, which did not take place at all, while the second, a consultation process on the dividend model, which would be progressive, and its alternative, which is what we have seen today, was not carried out properly. It was interesting to hear the various debates on the budget today when we had a chance by using that dividend model to meet our social welfare commitments as well as our climate commitments. We could have put the two together.
It is deeply unfortunate that chance was not taken. We can come back to it again in future years.
The Green Party supports both motions because it believes in putting a price on pollution but we need to do far more. That is only one small part of the jigsaw that we need to put in place.
In supporting Financial Resolution No. 2, as my colleague has said, I want to raise a point in the context of coming from rural Ireland and the fact that mitigating circumstances exist for the dependency on fossil fuels in that area. Thought should be given in future legislation to those mitigating circumstances.
I suggest that the Government is in breach of the National Oil Reserve Agency Act 2007 in continuing to level a 2 cent per litre tax increase because the Act is explicit in stating it is for raising funds to cover, but not exceed, the running cost of the National Oil Reserve Agency. Its costs are approximately €100 million per year and there is €250 million per year in that account at the moment. The Government has talked about re-purposing that money but that is not in the spirit of the legislation. I ask the Government to look at the potential to give some respite to people by reducing that level from 2 cent per litre to 0.5 cent per litre because that will cover the cost.
From the feedback I have got from outside this House, people are saying that this budget gave nothing, or less than nothing, to workers, pensioners, students or social welfare recipients but it hit people with increased prices on cigarettes and a regressive and unfair carbon tax. That is the truth. Punishing people for having an addiction is not the way to reduce smoking. Perhaps giving out free Nicorette patches, or whatever, might be the way to do that.
Moving on to the carbon tax, there was another protest outside Leinster House today, as part of rebellion week, which was about a just transition, which is a central pillar of the climate movement. There is nothing just about a carbon tax that hits the pensioner, or the person on a low income who cannot afford to retrofit their home, or who live in a council house and must wait for the council to do it. The budget did not bring in the real climate measures we need but the Government has made another grab at the pockets of ordinary people.
I, and RISE, are completely opposed to the carbon tax. The Government is going to pay a price, politically, for this carbon tax, particularly if it heads towards the figure it wants between now and 2030 by a means of continuous increases, year after year. The reason for that is that it is an unjust, regressive tax on the one hand and, on the other hand, is completely inadequate and, at best, a distraction from what we need to do to tackle climate change.
It is a regressive measure by all objective standards. It hits low income people harder than high income people. That expresses itself in the fact that low-paid workers will not be able to afford to buy electric cars. Low-paid workers often live far away and have to commute to their jobs and have no public transport options.
It is also completely ineffective. Demand for petroleum products is relatively inelastic because of the absence of alternatives provided by the Government. It refuses to invest in proper public transport. International studies demonstrate that a carbon tax will take 110 years to address the climate problem. We do not have that time, we have ten years, and cannot be focusing on these tinkering consumption taxes. We must focus on production, which means keeping the oil and gas in the ground.
A lady came into my office yesterday to talk about the fuel allowance. She explained that she had received a letter stating she had been turned down because the means test means the most household income she can have is €338. She is on invalidity allowance and her daughter is on jobseeker's allowance and they were over the threshold by €25.
This woman needed that fuel allowance because she has Crohn's disease and recently had a transplant. She is in mortgage distress because she is the only one in the household now paying the mortgage. She was dependent on that fuel allowance to get access to the warmth and wellbeing scheme. Only one in five families get the fuel allowance. This is a reality for people who are in that situation and this Government did not fuel poverty check this carbon tax. I am opposed to it in general but particularly because that check has not been done.
A couple of things need clarification. The Minister for Agriculture, Food and the Marine, Deputy Creed, earlier stated that the carbon tax would not affect green diesel. He said this evening that there will be a rebate for farmers. Is that the case? Does that include the €20 per tonne that was previously announced? Will there be a rebate for contractors on the same diesel?
I am shocked at what has been said by some parties here tonight. Everybody knows that people in rural Ireland, middle Ireland, who are trying to pay a mortgage and bring children to school have to use a car. There is not the infrastructure in that neck of the woods. Those people are being unfairly targeted with carbon tax.
I want those two questions I asked addressed.
We will be asking for a vote on this resolution and I suspect that at least 25% of the Dáil will be in opposition to it. More importantly, I think that many ordinary people will oppose this. They see it as the first tax in a whole series over the next ten years which will put the burden for the climate emergency on their shoulders rather than on the shoulders of the big corporations where it belongs. It is a regressive tax which will hit middle and low-income people and commuters. It is unjust and should be opposed. We need real measures to tackle the climate emergency, such as free public transport.
I fully intend to oppose Financial Resolutions Nos. 1 and 2. Each time the budget discussion comes before the House, there is an increase on the duty on cigarettes that affects ordinary people. I do not smoke myself but respect people who have to have a cigarette, on and off. It is difficult for them and a difficult time because many of these people are on pensions and low incomes and now they are hit with a cost of another 50 cent per box of cigarettes.
The carbon tax is a savage blow for the people of rural Ireland and I am shocked that Fianna Fáil is going to support that. This is a complete attack on the people of rural Ireland and nothing else. It must be opposed and I ask every Deputy here to stand by the people of rural Ireland and do not dare to support a further crucifixion of the people of rural Ireland.
We are required by the UN sustainability goals to tackle climate change and prevent poverty at the same time. We are not doing that with this measure.
The Government has talked about cross-party support. The reality is that the Government has failed to produce the review of energy poverty which was requested by the all-party Oireachtas committee. What the Minister announced today in terms of so-called mitigating measures will only assist one fifth of households in this country because that is how many receive the fuel allowance.
The objective of any carbon tax should be to achieve a change in behaviour but, particularly when it comes to home heating, many people cannot change their behaviour because of the way in which the grant scheme is structured.
I ask the Minister to answer the following. VAT on carbon tax will apply to public transport. Will this result-----
I also want to speak to Financial Resolution No. 2. The reality is that most people who live in rural Ireland have no option because they must travel to work. For instance, if a person is working in Sligo town and living in Tubbercurry, he or she has no other way of going to work other than to drive a car. Most of those people are an low incomes and cannot afford an electric car, even if the necessary charging points were in place. That is the reality for most people living out there.
A woman who is working recently came to me. She has an old stone house that is beautiful to look at but very cold. She put new windows into it but cannot afford to insulate it. There is nothing in this budget to provide for her to insulate her home. The Government needs to be doing that first. It must provide the correct options for people. We want people to insulate their homes and use carbon-efficient means of transport but they cannot be penalised for not doing those things unless the Government puts measures in place to provide access for people to use alternatives.
I wish to speak about these two financial resolutions. There are people who are addicted to cigarette smoke and who want to smoke.
I do not think we have the right to impose a further tax of 50 cent on a packet of cigarettes. If people want to smoke, that is their business. If the Minister and I do not want to smoke, that is our business but we should not hurt those already hard-pressed people.
I studied the carbon tax with people in my office this evening. It is frightening. If we analyse what it will do, going from €20 to €26 per tonne, and going as far as €80, which is the Minister's aspiration, it will cripple people. It will make it impossible for someone to buy a bag of coal or a bail of briquettes. People will find it impossible to fill their car with fuel. What are they supposed to do? Are they to get up on bicycles, cycle around and rub their hands together to keep warm? The Government must live in the real world. There are young people struggling trying to live but they will not be able to do so with all the taxes that the Government is imposing on them.
There were a lot of comments anyway. I thank the Deputies for their contributions. On Financial Resolution No. 1, I thought it had been long established in this House that there is a very significant impact by tobacco and smoking on public health policy. We do not just close our eyes to that and say that it is a matter for private individuals. It has an impact on our kids, on our health services, and on society. It has taken far too many mums and dads away from their dinner tables. We know this is a policy that works. Deputy Howlin asked a specific question, which is valid, on what we are doing to tackle the illicit trade in tobacco which is a real problem. He will know about that from his time in government that there have been several legislative changes on this. Tobacco smuggling remains a very high priority area for Government. The 2018 survey carried out by Ipsos MRBI on behalf of the Revenue Commissioners showed that the percentage of illicit cigarettes has been on a downward trend from 15% of the total consumed in 2010 to 13% in 2018. It is fair to pay tribute to the Revenue Commissioners for their ongoing robust enforcement in this area. It should also be noted that the World Health Organization estimates that 10% of the global cigarette market is illicit. Last year Revenue seized about 68 million cigarettes with a value of €41 million but there is no room for complacency in this area and enforcement will remain a key priority.
Deputy Sherlock raised a very important point about what we can do to help people quit smoking, the cost of nicotine replacement products and so on. I had a very interesting meeting with the Irish Cancer Society on this and I will revert to the Deputy and work with him and the Joint Committee on Health on how we can look at the cost of quitting. The Deputy makes a fair point on that.
The moment of truth is about to happen in this House soon on carbon. It is very easy to back the fluffy, nice-to-do measures that we are in favour of in taking action on climate change. It is quite different to face up to the truth and to say that if we want to do it, it will involve a carbon tax.
There are young people outside the gates of this House tonight who probably think that we should be doing an awful lot more on carbon tax and yet there is a bunch of people who have never seen a protest before that they did not want to join who are not in line with them.
The Deputies have no credibility on climate action. It is quite different for Members of this House to rightly say that they are in favour of a carbon tax but scrutinise Government on what it will do to mitigate. That is quite different from those who come in here and dismiss the idea of a carbon tax because they love to divide.
I welcome Deputy Smith to the debate. We just had it. In breaking news, climate change effects rural Ireland. When I was Minister of State with responsibility for the OPW, I visited Kerry and Cork South West, which Deputies Danny Healy-Rae, Michael Healy-Rae and Michael Collins represent, and we watched parts of our country begin to fall into the sea and begin to flood. The idea of dividing the country into rural and urban Ireland and that climate change does not affect rural Ireland makes the Deputies out of touch on the issue. They do not speak for rural Ireland.
People are asking legitimate questions tonight about what we will do to protect those vulnerable to fuel poverty. It is a really important point. We need to look at the overall impact of a €6 increase on household costs. In the grand scheme of things, it is relatively small but it is fair to say that the burden of increased carbon taxes falls unequally. In lower income homes, it has a bigger impact because they spend more on energy as an overall proportion. To counteract this, more than one third of the funds raised by the increased carbon tax will be devoted to ensuring that the least well-off in society are protected from the increased carbon tax. We are doing this with two measures, including by increasing the fuel allowance by €2 per week which applies from 1 January and means an annual benefit of €56 which will leave the 22% of households which are in receipt of the fuel allowance better off after the carbon tax than they were before it in relation to fuel poverty. The Minister, Deputy Bruton, will increase funding to programmes such as the warmer homes initiative.
I will not be able to go through the measures in the time available, but people have asked what we will use the carbon tax revenue for. There are three categories. The first is the protection of the vulnerable through the fuel allowance and the energy poverty efficiency upgrades, which I have just outlined. Th second is a just transition fund which will allow for aggregated housing upgrade scheme, peatlands rehabilitation and the just transition fund. The third is investing in a low-carbon transition, which includes more greenways, more urban cycling, more continuation of electric vehicle grants, further investment in electric charging points and a commitment to our overseas development aid through the green climate fund. We have announced measures on mitigating.
I will get to that. I am answering them in the sequence in which they were asked. Deputy Dooley asked about the just transition fund. I assure him that we obviously listen to Deputy Carey, the Minister of State, Deputy Breen, and Senator Martin Conway, and Deputy Dooley, as he knows. The Minister, Deputy Bruton, has confirmed that the principles of the just transition fund will have to be provided for beyond just the midlands. It is right and proper that the midlands is a priority area at the moment for reasons the Deputy will understand but those principles will need to apply more broadly than that.
That is a matter for the Deputy to debate with the Minister and a matter for the Finance Bill.
Deputy MacSharry asked about the NORA levy. The Government has decided that it will be used to fund climate action. The Minister, Deputy Bruton, will bring legislation forward shortly on this. If the Ceann Comhairle will allow me to answer Deputy Fitzmaurice's question, I will say that when a previous Minister for Finance introduced a carbon tax in budget 2012, he made provision for a double income tax relief for farmers to compensate for the increase. This relief will continue to apply.
As fewer than ten Members have risen I declare the question carried. In accordance with Standing Order 72 the names of the Deputies dissenting will be recorded in the Journal of the Proceedings of the Dáil.