Martin Conway (Fine Gael)
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I welcome the Minister of State, Deputy Perry, and wish him a very successful 2013. If 2012 is anything to go by, he will certainly make a significant difference in terms of creating jobs, which is a passion close to his heart. This matter relates to job retention as well as job creation. The announcement in the last budget that a rebate structure would be put in place for the road hauliers was great news because fuel costs for them were significant. There were challenges with the North and internationally in terms of the cost of fuel and the Government responded appropriately with a scheme. There was a significant amount of representation by the Irish Road Haulage Association dating back 14 months which led to this very important development.

That said, I would like to see it rolled out to the bus and coach industry which is a significant player in terms of economic development, tourism development and ensuring The Gathering is a success and people get from A to B safely, comfortably and easily. There is no difference between transporting people and goods.

One would suggest that they go hand in hand. Therefore, it makes eminent sense that the scheme that is applicable to the road hauliers, and appropriately and correctly so, should also be mirrored among the coach and bus hire operators. It is a significant industry because thousands of jobs rely on the sector directly and indirectly. These operators have found themselves significantly and economically challenged when tendering for State jobs. For example, school bus runs have been cut to the bone and service providers barely make a living. Recently I spoke to a bus operator who would have earned ¤40 per week if he had won a contract. The sector poses significant challenges but it is an open and shut case. The finance Bill gives us an opportunity to grant equity to the haulage and bus hire industry. I hope that the Minister of State will have good news in this regard.

John Perry (Sligo-North Leitrim, Fine Gael)
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I thank Senator Conway for raising the important issue of the role of business and the survival of small companies. I am pleased to have the opportunity to speak on behalf of the Minister for Finance on the motion to introduce an excise rebate on diesel for passenger transport companies in the Finance Bill 2013.

My colleague, the Minister for Finance, announced in his budget address the introduction of a rebate on diesel for tax-compliant hauliers with effect from 1 July 2013. It is intended as a support to small businesses in all sectors of the economy as virtually all businesses rely on cost-effective transport for their inputs and outputs. Such transport is provided by hauliers, the majority of whom are themselves small businesses. The rebate was introduced to assist the competitiveness of this key industry.

The Minister, in providing for this support, did so in recognition of the high cost of fuel and the effect this was having on transport costs for small business. Ireland, as with other countries, has experienced an increase in the cost of petrol and auto-diesel. The increase in fuel prices is an international phenomenon. There seems to be a belief that the increased fuel prices in recent years is a result of high levels of taxation, but this is not the case. Fuel prices are driven by a number of factors including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices over recent periods reflected additional factors such as the geopolitical uncertainty in northern Africa and the Middle East with potential supply disruptions.

The excise rates, including the carbon charge, in Ireland on motor fuels are 58.7 cent on a litre of petrol and 47.9 cent on a litre of auto-diesel. Ireland's excise rates are the ninth and fourth highest in the EU27 for petrol and auto-diesel, respectively. However, our rates remain lower than many of our main trading partners. Members will be aware that the Minister did not increase excise rates on fuels in the recent budget. The Minister has received a number of calls for a reduction in excise duty and there is a general belief that the increase in fuel prices was in some way a bonanza for the Exchequer. This is not the case. It should also be noted that the Exchequer yield from excise, as excise is set at a nominal amount, does not increase as the price of fuels increase. On the other hand, the yield from VAT per litre of fuel, as VAT is set as a percentage of the price, increases as the price of fuels increase. It is important t note that businesses that are registered for VAT are entitled to reclaim VAT incurred on their business inputs, including VAT incurred on auto-diesel. Accordingly, there is little or no gain to the Exchequer because it is a VAT reclaim and a lot of the businesses are VAT registered.

Members will be aware that in the past the Energy Tax Directive 2003 incorporated a special derogation for an excise duty relief on fuel used for local public passenger transport vehicles in Ireland. The derogation expired on 31 December 2006. The energy tax directive allowed for the relief derogation to be extended with the approval of the Commission. At the time, together with several other member states, including France, Belgium, the UK, Greece, Sweden, Malta, Italy, Portugal, Denmark and Finland, Ireland applied to have the derogations extended. However, all of the requests were refused by the Commission. The Irish derogations were officially turned down in March 2007. Consequently, the Finance Act 2008 provided the legislative changes to withdraw the relief in respect of fuel used for public passenger transport vehicles - the point raised by Senator Conway - with effect from 1 November 2008 and the appropriate full excise rates applied from that date. In the circumstances the reintroduction of such an excise relief does not arise.

The Minister acknowledges that the energy tax directive permits the application of a lower rate of mineral oil tax to diesel used for certain commercial purposes, provided that the minimum rate of taxation specified by the directive for that fuel is respected. Commercial use includes the carriage of passengers by road in vehicles with eight seats or more and to road haulage by larger vehicles with a maximum permissible gross laden weight of not less than 7.5 tonnes. The current EU minimum rate is 33 cent per litre. The maximum difference that may be allowed is the difference between the current Irish rate of 47.9 cent per litre and the EU minimum providing for a rebate of up to approximately 15 cent per litre.

The cost of a relief for all eligible commercial vehicles at the maximum permissible rate would be in the region of ¤200 million in a full year. In addition, the administrative difficulties for Revenue would be significant. A register of all users would need to be established including the details of the companies and individuals involved, identifying the type of vehicle that would qualify for relief, establishing that the fuel was used in the vehicles concerned, and the diversion of resources from other areas of tax control and compliance that this would involve. In addition, the rebate cannot be restricted to indigenous industry, foreign based hauliers and coach operators would also have to be included. This would present particular difficulties as they could not be subject to the same audit, tax clearance controls as Irish based operators. Any such scheme of repayment would potentially be open to serious abuse.

For all of these reasons the Minister for Finance decided that the commercial diesel rebate, announced in his budget speech, would be confined to licensed, tax-compliant road hauliers. It is worth noting that one of key arguments for the introduction of a rebate for the haulage industry is the fact that a large quantity of fuel purchased by the industry is purchased abroad thus generating no tax revenue for the State. A rebate should encourage hauliers to start purchasing their fuel in Ireland thus offsetting some of the costs involved. Such an arrangement does not exist, for the most part, for the coach industry or for other unlicensed hauliers.

With regard to fuel prices, given the current pressure on the public finances, there are no further plans for temporary taxation adjustments for specific sectors or businesses in general, as to do so could lead to significant costs to the Exchequer. The Minister has received a significant number of submissions and representations on behalf of the passenger transport sector and will consider the matter in the context of the Finance Bill.

Martin Conway (Fine Gael)
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I thank the Minister of State for delivering the reply. The vast majority of his reply outlined the reasons a fuel rebate could not be applied but at the end he said that the matter would be considered "in the context of the finance Bill."

Marie Moloney (Labour)
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I am sure that the Senator knows that he can ask just one supplementary question.

Martin Conway (Fine Gael)
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Yes. There is a clear divergence in his statement but I thank him for his reply. The issue shall not go away. Perhaps he will inform the Minister that there will be a significant campaign. One can self-declare for a register but there are ways around that.

John Perry (Sligo-North Leitrim, Fine Gael)
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I appreciate the Senator's concern for the road haulage companies involved. Obviously the Minister supplied me with a detailed submission but I will pass on the Senator's concerns. I have no doubt that the Minister will refer to it in the finance Bill in whatever way that he can.