Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank the Cathaoirleach for the opportunity to come to the Seanad to contribute to this debate on fuel laundering.

The Office of the Revenue Commissioners, which has responsibility for the collection of mineral oil tax and for tackling the illicit trade in mineral oil products, informs me that it is acutely aware of the threat posed by 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 some €1.1 billion annually in excise duty from road diesel. Therefore the potential for loss of tax revenue from this fraud is very significant and very real. This type of criminality also undermines the competitiveness of legitimate businesses, damages our environment, can damage consumers’ vehicles and sustains organised criminal gangs who are the prime movers in this illegality.

Recognising the threat that this illegal activity poses to the Exchequer and to legitimate business, Revenue has made action against illegal fuel related activities one of its top corporate priorities and has adopted a comprehensive strategy to tackle the problem. This strategy encompasses the following elements.

The licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability of the fuel criminals to get laundered fuel onto the market. A new licensing regime was introduced for marked fuel traders in October 2012 which is designed to limit the ability of criminals to source marked fuel for laundering. New requirements on fuel traders’ records of stock movements and fuel deliveries were introduced by regulation to ensure data are available to assist in supply chain analysis. New supply chain controls that require all licensed fuel traders to make monthly electronic returns to Revenue of their fuel transactions were introduced from January 2013. The first returns were received by Revenue in February. I understand that Revenue has initiated a process of rigorous analysis of these returns. This will support the development of a comprehensive overview of supply patterns and the identification of suspicious or anomalous transactions and facilitate robust follow-up enforcement action where necessary. This is very important and we have not had it up to now. We have had no picture of what has been coming into the country on a legal basis. Having this analysis and knowing the legal people, we will be able to see exactly the gaps that exist and which are clearly being filled by illegal activity. Colleagues will recall that this was part of a budget announcement which has come about only from 1 January this year. We are beginning to see the data on the distribution, which is crucial to tracking where the illegal stuff is.

There is an intensified targeting, in co-operation with other law enforcement agencies on both sides of the Border, of fuel laundering. That has been ongoing. There has been an intensified targeting, in co-operation with colleagues on the other side of the Border, of the illicit sale of laundered products. This involves a concentration on building intelligence, gaining an understanding of the supply chain, applying analytics to available data, embarking on a strategy of closing down stations that were in breach of legislation and-or regulations, and working collaboratively with other law enforcement agencies on both sides of the Border. One of the objectives is to cause maximum disruption to laundering plants and networks and to prevent trading by stations that are operating outside the law.

Following discussions with HM Revenue and Customs, HMRC, in the UK on regulatory measures to tackle the problem, the two Administrations signed a memorandum of understanding in May 2012 on a joint approach to finding a more effective marker for use in both jurisdictions, and an invitation to make submissions was published in June 2012. By the deadline in November 2012, 12 submissions had been received and these are currently being evaluated. The problem up to now is that the marker employed has allowed laundering to exist. If we can get ahead of that with new technology and ahead of the criminals, we can reduce criminality levels. Both HMRC and the Irish Revenue are working on a collaborative basis and we are examining submissions to see how we can overcome the marker issue. If we can solve that problem and get ahead of the criminals, we will be nine tenths of the way to addressing this problem.

Revenue’s enforcement strategy in the fuel sector has already yielded results. Between 2010 and yesterday, Revenue officers detected and closed 28 oil laundries, not including the oil laundry detection made yesterday morning, which I will refer to separately, and seized 620,000 litres of oil, together with 12 oil tankers and 60 vehicles. Additionally, almost 2 million litres of fuel, held for commercial purposes, were seized during that period. Revenue shut down 32 filling stations in 2011, either because they did not have a licence or were in breach of licensing conditions. Revenue closed a further 57 outlets in 2012 and seven to date this year. Almost 90 stations have been closed down between 2011, 2012 and the first part of this year. A sizeable number have been detected and closed down, and it illustrates the scale of the problem we are facing.

Regarding the detection made yesterday, officers from Revenue's customs service supported by the regional support unit and local gardaí uncovered an oil laundering plant in Drumacon, County Monaghan, with the capacity to launder over 15 million litres of fuel per annum with a potential annual loss to the Exchequer of over €8 million. The laundry was uncovered following an intelligence-led surveillance operation. A forklift, six vehicles and ancillary equipment were seized from the plant. In addition, seven tonnes of toxic waste - the by-product of the laundering process - were also seized. In a connected search of a commercial yard in Longfield, a tanker with 20,000 litres of fuel, a trailer with a concealed tank and 68 bags of bleaching earth were also seized. Investigations are ongoing. Not only is this the result of intelligence, the officers from Revenue, the Garda Síochána and the officers in HMRC on the other side of the Border with the PSNI are working in very difficult conditions. They face threats and intimidation. Closing down these facilities is difficult, hard work. I express our deepest appreciation of the work of the Irish Revenue and HMRC who do this on a daily basis. In many cases these are local people who have to take on this criminality and they deserve our support and thanks in their work.

Stringent penalties are prescribed for offences relating to mineral oil smuggling and laundering. For example, 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 a fine, or both. Following a substantial increase introduced by the Finance Act 2010, the fine is 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 those goods. I believe that these penalty provisions permit the courts to impose sentences reflecting the seriousness of this criminal activity and deterring involvement in this form of crime.

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 will serve to enhance its effectiveness.

The Minister for Finance and I, as well as colleagues in Revenue, greatly appreciate the interest taken in this House, led by Senator Jim D'Arcy and others, in highlighting this issue on a frequent basis and rightly calling the Government to account, which has led to this important debate today. We appreciate the opportunity to put this information on the record of the Seanad in order that the public, through Members and colleagues nationwide, are aware of the seriousness of the problem, the measures that have been taken and of the work that is under way. It is important that the public be fully supportive of this work as the Government does its best to close down what is a dreadful crime that affects the life of this country.