John Perry (Sligo-North Leitrim, Fine Gael)

I thank the Senator for raising this important issue. I am taking this matter on behalf of the Minister for Finance, Deputy Michael Noonan.

I welcome the opportunity to inform the House of the latest position on the ongoing work to combat the problem of fuel laundering and smuggling which has a significant impact. The Office of the Revenue Commissioners which has responsibility for the collection of mineral oil tax and tackling the illicit trade in mineral oil products has informed me that it is acutely aware of the threat posed by the illegal activity and tax evasion in this area. The most serious risk comes from the large-scale laundering of markers from diesel that is subject to a reduced rate of mineral oil tax on condition that it is not used in road vehicles.

Revenue collects €1.1 billion annually in excise duty from road diesel and consequently the potential for loss of tax revenue from this fraud is significant. Naturally, this is not the only cost associated with this form of criminality. It also undermines the competitiveness of legitimate businesses, damages the environment, can damage consumers' vehicles and sustains organised criminal gangs which are the prime movers in this illegality. For all of these reasons, Revenue has made action against illegal fuel-related activities one of its top corporate priorities. It is addressing the problem in the framework of a comprehensive mineral oil strategy and an action plan for 2011-12. Its key areas of activity include robust and sustained enforcement action, implementing more effective controls for oil distribution and pursuing a more effective marker. This last point was referred to by the Senator. This work is being done in conjunction with the Her Majesty's Revenue and Customs in the United Kingdom.

Enforcement action is taken at all stages of the fuel supply chain, taking on those involved in laundering and who sell laundered fuel. Revenue is supported in this work by well established structures to ensure close co-operation between all relevant agencies north and south of the Border. The cross-Border fuel fraud group brings together representatives from several agencies, including An Garda Síochána and the PSNI, as well as the United Kingdom and Irish Revenue authorities. There has been excellent and welcome co-operation between all agencies in sharing intelligence and identifying and investigating criminals involved in this fraud.

The Senator will be pleased to note that there have been notable successes in the fight against the launderers. Between 2010 and yesterday, Revenue officers detected and closed 18 oil laundries and seized 650,000 litres of oil, together with ten oil tankers and 38 vehicles. Additionally, more than 1 million litres of fuel, held for commercial purposes, was seized during that period. I compliment everyone involved. Only this morning, Revenue enforcement officers, supported by the Garda regional support unit, uncovered an oil laundering plant near Castleblayney, County Monaghan. The laundry was in operation when Revenue officials carried out a search of the premises. It was concealed in a curtain-sided lorry situated in a commercial yard. The lorry, two 40 ft. containers, two tankers, one van and 40,000 litres of laundered product were seized. A significant quantity of toxic waste was also uncovered at the site. Three men were arrested and inquires are ongoing. The operation was the result of surveillance activity carried out by Revenue officers. I congratulate everyone involved in this major seizure.

Stringent penalties are prescribed for offences relating to mineral oil smuggling and laundering. A person convicted on indictment of an offence of evading or attempting to evade excise duty can be sentenced to imprisonment for up to five years or given a fine, or both. Following a substantial increase in the penalties introduced by the Finance Act 2010, the maximum fine is of an amount not exceeding €126,970 or, where the value of the goods is more than €250,000, an amount not exceeding three times the value of the goods. These penalty provisions permit the courts to impose sentences reflecting the seriousness of the criminal activity and serve as a deterrent from involvement in this type of crime. Notwithstanding these achievements, it is recognised that the detection and closure of all laundries will not solve the problem. Oil launderers need to be denied access to marked oil for the purposes of laundering, and they need to be denied access to the market for their laundered product.

Since this time last year, the licensing regime for road fuels has been tightened up to make it more difficult for launderers to get their product onto the market. Revenue is engaged in a vigorous campaign targeting specific locations nationwide, with the intention of immediate closure of unlicensed outlets and challenging instances of non-compliance with licence requirements. As a result, 32 filling stations were shut down by Revenue in 2011 either because they did not have a licence or were in breach of licensing conditions and a further 20 outlets have been closed to date this year. This represents real progress and this important work is continuing.

Legislative action taken in this year's Finance Act will provide improved underpinning and support for action to control and supervise the fuel supply chain and restrict the scope for illegal activity.

The previous licence for persons dealing in road fuels has been replaced by a new auto-fuel trader's licence, as and from 1 July. In addition, anyone dealing in marked diesel or marked kerosene will now, for the first time, have to be licensed for the purpose. The requirement to have a marked fuel trader's licence comes into operation with effect from 1 October.

The Revenue Commissioners are the licensing authority and will have power to refuse a licence where the applicant does not show to their satisfaction that any conditions that they may attach to the licence can be satisfied. Revenue is empowered also to revoke a licence, if the holder contravenes or fails to comply with any of its terms, or any provision of excise law relating to fuel. That is a good tightening up as well.

In parallel with the introduction of the new licensing system, the regulations that lay down the detailed rules and requirements on mineral oil matters have been reviewed by the Revenue Commissioners and new regulations, containing additional and reinforced provisions, were made last week. The requirements for record keeping have been strengthened, and a new requirement for persons dealing in fuel to make periodic returns to Revenue have been introduced. All traders, including traders in marked fuels, will have to make monthly returns, electronically, detailing their fuel transactions, including purchases. This system of returns, which will come into operation from the start of next year, will be an important new source of information on the supply chain for Revenue. It will, for example, assist in the identification of unusual or anomalous patterns of activity.

In addition, Revenue and Her Majesty's Revenue and Customs in the UK have been working in partnership to identify a new, more effective marker. A memorandum of understanding has been signed between the two authorities. A joint invitation to make submissions, IMS, seeking proposals was published in June. Both authorities are committed to seeking the widest possible range of proposals so that the most effective marker, the point Senator Jim D'Arcy made, for the future can be identified. The closing date for receipt of submissions is 30 November.

The problem of illegal activity in the fuel market is unquestionably a serious one, and the extensive enforcement action that is being carried out on an ongoing basis highlights the Government's commitment to combating it. The legislative steps that have been taken, together with the work on development of a more effective fuel marker, will provide important new support for this action and serve to enhance its effectiveness. Senators can be assured that all possible steps, with the full determination of the Minister on major cross-Border co-operation, will continue to be taken against those who involve themselves in this damaging form of criminality.