Matt Carthy (Cavan-Monaghan, Sinn Fein)
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60. To ask the Minister for Finance if he will extend the exemption of green diesel from the increase to the carbon tax introduced as part of budget 2021; and if he will make a statement on the matter. [17195/21]

Pearse Doherty (Donegal, Sinn Fein)
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I appreciate this. The question is about whether the Minister will extend the exemption on green diesel from the increase in carbon tax introduced in budget 2021. There is an extension whereby it will not come into effect until 1 May of this year, as a result of the dual issues of Brexit and the pandemic. These issues have not been resolved but there are also serious issues in terms of the fairness of the tax. We want to hear the views of the Minister on it.

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland’s excise duty treatment of fuel used for motor and heating purposes is based on European Union law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the energy tax directive.

Mineral oil tax is an excise duty comprised of carbon and non-carbon components. The carbon component is often referred to as carbon tax, but it is only one part of the overall tax that applies to mineral oils and other fuels used for motor and heating purposes. Mineral oil tax as applied in Ireland is subject to the requirements of the energy tax directive.

The main agriculture exposure to excise duty comes from the fuel inputs primarily through the use of marked gas oil, which is also commonly referred to as green diesel, farm diesel or agricultural diesel. Marked gas oil is currently subject to a rate of mineral oil tax of 11.8 cent per litre. This compares to the current full rate of mineral oil tax for auto diesel used as a propellant of 51.5 cent per litre.

Farmers and agricultural contractors who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.

Section 26 of the Finance Act 2020 increased the rate of carbon tax to €33.50 per tonne. This applied to transport fuels from midnight on budget night but in line with the policy approach applied in this area in recent years, I delayed its implementation on all other fuels, including marked gas oil, until 1 May, after the winter heating season. This was not an exemption of marked gas oil from the budget 2021 increase. It was a repeat of what we did in previous years. I remain committed to the plans I outlined in the Finance Bill.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister will appreciate that the agricultural sector is going through very challenging times as a result of Brexit and, like many other sectors, the pandemic. He is also aware that as he introduced the budget, despite the fact this issue was postponed until 1 May there was quite a backlash from the agricultural sector with regard to this increase. These are people who care for the land very much but have seen this increase as a way of picking their pockets. Many people, particularly in communities such as mine in Donegal and along the west coast, are struggling to survive on the small farm holdings they have. The introduction of this has been postponed until 1 May. The question is whether the Minister is open to deferring it further. In particular, will he address the inequalities that exist between farm contractors and farmers with regard to being able to claim back the relief under section 664A?

Paschal Donohoe (Dublin Central, Fine Gael)
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I am very much aware of the issues Deputy Doherty has referred to and the hardship many people in our agricultural community are facing due to the issues of the pandemic and the consequences of Brexit. However, this measure has been introduced on a phased basis over many years. The ongoing challenges that members of the agricultural community face regarding the costs and impact of carbon taxation on their living standards and the bills they need to pay are reflected in the taxation treatment provided for with respect to carbon tax. This is how we are recognising the issues Deputy Doherty is referring to. It is my understanding that not only farmers but also agricultural contractors who incur expenses on farm diesel in the course of their trade are able to claim this back as a business expense against either their income tax or their corporate tax bill.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister is aware that farm contractors are not able to claim back the double income tax reliefs that farmers do. He is aware of this because he previously stated he would consider looking into it. Has he considered this matter? Is he aware that, for example, the association of farm contractors has made it clear that the costs involved are in the region of €13,455 per annum per contractor? They state they will have no option but to pass this on to the individual farmers for whom they work. This is why the issue is important. Is the Minister open, as he has indicated previously, to considering the matter? Has it now been concluded? Where does he stand on the issue that while farmers are able to avail of the double income tax relief under section 664A farm contractors are not?

Paschal Donohoe (Dublin Central, Fine Gael)
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I remain committed to the implementation of the carbon tax changes that were included in the Finance Bill. These include the increase in carbon pricing and a number of other fuels from 1 May. I am aware of the issue Deputy Doherty referred to regarding independent agricultural contractors. I remember with the Finance Bill before last referring to difficulties I faced regarding the definition of these contractors and the work they do. I will get an update for the Deputy on where work on this issue stands. With regard to the core issue as to whether the change is going ahead, I need to inform the Dáil that it will be, and while I acknowledge the many challenges it poses for some, it is an essential part of how we can respond to the challenge of climate change.